Fresh Warning Bell Chimes for Second-Half Growth in Canada

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For the first time this year, the Canadian economy is coming in below analyst expectations, according to a closely watched gauge of economic surprises.

The index from Citigroup Inc. -- which falls when data prove worse than forecast -- dropped below zero Tuesday for the first time since December. It indicates Canada’s growth might be slowing down at a faster pace than analysts expect, fueled by trade-war concerns.

Fresh Warning Bell Chimes for Second-Half Growth in Canada

Canada’s dollar has also weakened against the greenback this month, making it one of the worst currencies against its Group of 10 counterparts.

The negative reading follows a series of disappointing economic reports this month including jobs, trade and housing starts, giving economists some pause on the extent of the country’s second-half deceleration. Tuesday’s manufacturing numbers were also weak, as the better-than-expected headline result was undermined by a decline in factory volumes and inventories.

While the nation’s economy is nowhere near peak growth, the data so far this year have been strong enough to keep the Bank of Canada from cutting interest rates, making it an outlier among other major central banks. But the recent run of weak numbers may provide the central bank with more ammunition if it decides to lower borrowing costs at its next meeting on Dec. 4.

In a speech Tuesday, Bank of Canada Deputy Governor Carolyn Wilkins said the global context has worsened, and risks to growth have increased. Consumer prices in Canada held steady in October for a third-straight month, while the average of core measures ticked up slightly.

Economists surveyed by Bloomberg expect the economy to decelerate to a yearly pace of 1.5% in 2019 and 2020, in line with expectations for slower global growth.

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