Saturday, November 1, 2008

Canada's Economy Contracted In August

Canada's Economy Contracted In August

CAD GDP (Aug) Actual -0.3%, Expected -0.3%, Previous 0.7%

Release Explanation: This report measures the monetary value of all goods and services produced within a Country's borders in a specific time period. GDP is calculated on an annual basis, is the broadest measure of activity, and the primary gauge of each economy's overall health. It includes all Company and Personal consumption, government outlays, investments, and exports less imports, that occur within a defined territory.

A strong annual GDP outlook will lead to strong investment in an economy especially from overseas. A weak annual GDP outlook will usually lead to a slowdown in the economic business cycle. The yearly forecast is as important as the actual release number. As a reflection of the value of what an economy is producing, GDP will invariably have a ripple effect across all other economic releases, over a period of time

Trade Desk Thoughts: According to Statistics Canada, real gross domestic product (GDP) saw a 0.3% decline in August, partly reversing the 0.7% increase in July. Wholesale trade, manufacturing, and the energy sector, which were the main contributors to the July increase, all retreated in August. Some transportation industries, such as rail and truck transportation, were affected by the downturn in these sectors. Conversely, accommodation and food services advanced as did the public sector. Finance and insurance, and retail trade were unchanged.

Output of the energy sector decreased 0.5% in August after increasing 2.7% in July, which accounted for a large part of the July growth in total economic activity. Petroleum and natural gas extraction both declined and the pipeline transportation of natural gas dropped significantly. Services to oil and gas extraction facilities were up significantly for a third consecutive month, returning to their early 2006 levels, as both contract drilling and rigging activities increased in August. Output of refineries declined 4.5%, partly as a result of production disruptions at two major plants.

Forex Technical Reaction: The cad had been rising in the overnight session and the trend continued after the report was released as crude oil futures declined by 2.8%.

Written by TheLFB Trade Team, © 2007-2008 LFB Services, LLC. All rights reserved.

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