Trade Desk Thoughts - Canadian GDP

Canadian GDP (June) Actual 0.1%, Expected 0.1%, Previous -0.1%

Release Explanation: Gross Domestic Product (GDP) 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 slow down 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. A volatile release because just one airplane order not accounted for can move the number by 0.5% and therefore lead to volatile re-alignments of Currency positions.

Trade Desk Thoughts: According to Statistics Canada, real gross domestic product (GDP) edged up 0.1% in the second quarter of 2008, following a 0.2% decline (revised from -0.1%) in the first quarter. Real GDP advanced 0.1% in June. While final domestic demand continued to outpace GDP, growing 0.5% in the quarter, foreign demand for Canadian goods and services registered its fourth consecutive quarterly decline. Production in the service industries was up 0.6% during the second quarter, led by gains in the public sector, finance and insurance, accommodation, retail trade and transportation. Significant declines in the energy sector, notably natural gas production, and continued contractions in manufacturing activities, albeit at a much reduced pace compared to previous quarters, were behind the 1.0% decline in the goods-producing sector. Consumer and government spending on goods and services advanced. Businesses increased their inventories and reduced their expenditures on fixed capital. Corporate profits grew significantly as prices, particularly for energy products, jumped. The international trade surplus, measured in nominal values, increased as exporters benefited from higher commodity prices. Nonetheless, the volume of exports declined in the quarter.

Forex Technical Reaction: The CAD fell after the report, but the loonie is getting a boost as oil rises on speculation Tropical Storm Gustav will enter the Gulf of Mexico as a hurricane and threaten oil production facilities.

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