Canada’s GDP in 2019’s Q3 is expected to show weaker growth on Friday

Canada’s gross domestic product had shown exceptional growth in the second quarter of 2019. The Canadian dollar has remained fairly stable this year. Against the greenback, the currency has sustained its value close to where it started the year. In the third quarter of 2019, Canada’s GDP, however, is expected to register considerably softer growth, as per the analysts. The report is set to be announced on Friday at 13:30 GMT.

U.S – China Trade Complication Is The Primary Reason For Expected Decline In The GDP

The experts have further highlighted that the rising tensions between the two largest economies of the world, the United States of America and China is expected to keep the country’s quarterly GDP under pressure as investors continue to lose the risk appetite. Indebted consumers were also highlighted as the reason for an anticipated loss of pace in Canada’s GDP.

Canada had printed a 3.7% growth in GDP in the second quarter that marked the fastest rate in the past two years. According to the economists, the figure for 2019’s Q3 is expected to lie near a significantly reduced 1.3%.  

Canada has suffered on exports and business investments front due to the trade tension that is likely to be the primary reason for slower growth in GDP in Q3. In terms of domestic affairs, thanks to the employment gains and sufficient wages, the rising consumer spending will support the GDP. On the contrary, however, the increased debt-to-income ratio can be expected to minimize the optimism further for Canada’s GDP.

Rising Household Debt Is Likely To Weigh On The Quarterly GDP

Carolyn Wilkins, Senior Deputy Governor at the Bank of Canada (BOC), stated in his last week’s speech that the rising household debt continues to be a challenge for the economy that may manifest in the form of lower than expected growth in the gross domestic product. He further added that while the hike in global oil prices may support the economy, the decline in production due to unforeseen shutdowns may steal the optimism from the upcoming GDP report.

The BOC has also expressed confidence in the falling unemployment rate and hitting the 2% inflation target this year. Weaker data for the manufacturing and trade sector in combination with higher debts, however, may hint at the requirement of a rate cut from the Bank of Canada.

Ahead of the GDP report, USD/CAD was seen trading sideways on Thursday. Having opened at 1.3200 this morning, the pair is currently exchanging hands at 1.3280. The next major move in the currency pair is expected to present following Canada’s quarterly GDP report on Friday.