Canadian economy grew by a faster than expected 0.5 percent in August from July on stronger performance in both goods and services, Statistics Canada said on Friday.
Analysts had expected a rise of 0.3 percent and said August's strong performance underscored expectations of an interest rate hike by the Bank of Canada in December. Statscan revised July's month-on-month growth to 0.2 percent from an initial 0.1 percent. "Stronger domestic demand, a build-up of manufacturing inventories and the end of extended planned shutdowns were behind this growth," Statscan said in its daily bulletin.
"With today's stronger than expected number, we are raising our Q3 growth estimate to 4.0 percent from 3.1 percent," Merrill Lynch economist Robert Spector said.
"This would imply that the (central) bank's output gap measure is possibly more than fully closed. We continue to expect a December 7th rate hike," he said. The Canadian dollar rose moderately on the news to C$1.2187 to the US dollar, or 82.05 US cents, from C$1.2237, or 81.74 US cents, at Thursday's close.