By Akhil Shah

OTTAWA (MNI) – Canada’s economy is expected to have rebounded
sharply in October when Statistics Canada publishes its monthly gross
domestic product report on Thursday.

Economists surveyed by Market News International expect the economy
to have expanded by 0.3% in October. This expectation would provide a
relatively strong start to the last quarter of 2010 and a good
bounceback from the 0.1% decline in September.

A surge in consumer expenditure assisted robust recovery during the
first half of the year as growing wages and employment encouraged
consumption. However, since then household expenditure has declined and
stunted the pace of economic growth.

A consumer survey, conducted by The Conference Board of Canada to
learn public expectations about present and future financial situations
and jobs, showed the index edged up 1.9% in October, as the economy
added 3000 jobs. However, the index remains 5.9% lower than it was in
October, 2009.

Krishen Rangasamy, an economist with the Canadian Imperial Bank of
Commerce (CIBC), expects October GDP (by industry) to expand by 0.4%.
The rise would be helped by “strong factory shipments for the month,” he
said, adding “Wholesale volumes also increased in October and suggest we
will have a good month.”

“Housing starts activity decreased in October and may slow the
construction sector in the service-producing industries,” Rangasamy
said. “Construction is harder to estimate as the housing starts are
declining but at the same time the government fiscal stimulus is at
work, so they are building fewer houses but more infrastructure projects
on the whole,” Rangasamy said.

“Our forecast is for the Canadian economy to have grown by 0.3%,”
Stewart Hall, economist at HSBC securities, wrote to his clients. “A
turnaround in resource related industries,” (Enbridge pipeline that was
reopened after closure in September) will also boost the statistic, Hall
noted. Service-producing industries are expected to grow by 0.2% and the
goods-producing industries are believed to jump 0.7% in October, Hall
wrote.

Wholesale sales volumes jumped 0.3% and manufacturing shipments
advanced 1.1% in October. These gains are “sufficiently strong to
contribute to GDP growth rising 0.3%,” Paul Ferley, assistant chief
economist at Royal Bank of Canada, said.

All told, economic growth will continue to be suppressed by the
current trade deficit (-C$1.7 billion) as exporters continue to feel the
heat from the appreciating Canadian dollar, analysts said.

** Market News International Ottawa **

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