Economy grows for second month

The Canadian economy grew for the second straight month in October, expanding 0.2 per cent as the housing sector and utilities helped the country edge further out of recession.

While the gain was less than the 0.3 per cent anticipated by economists, the hot market for existing homes led to a 7.2 per cent gain in the real-estate industry. Cold weather in some parts of the country spurred higher demand for electricity and natural gas, leading to a 2.4 per cent increase in utilities, Statistics Canada said.

The retail industry also saw growth in October, further evidence of a rebound in the consumer spending that Bank of Canada Governor Mark Carney says the economic recovery will depend on until foreign demand for Canadian exports strengthens. Mr. Carney said last week that he expects the emergence from recession to be “more protracted and more reliant” on domestic demand than usual.

The month kicks off a quarter for which economists predict growth of about 3.3 per cent on an annualized basis, after an anemic 0.4 per cent between July and September and three straight quarters of contraction before that. Mr. Carney has pledged to keep interest rates at a record low 0.25 per cent through June to aid the recovery, and Prime Minister Stephen Harper's government is running record budget deficits to fund stimulus spending.

Canada's battered manufacturing industry was largely unchanged in October after a 1 per cent gain the month before, Statistics Canada said. Meanwhile, industries that declined in October included finance and insurance and the mining and energy exploration sector.

On a year-over-year basis, gross domestic product was down 3.2 per cent in October, indicating the ground the economy still needs to gain to get back to pre-recession levels.

Doug Porter, deputy chief economist at BMO Capital Markets in Toronto, said the “modest” October gain indicates it may be tough for the economy to post growth above 3 per cent in the fourth quarter as forecast.

“This is a classis glass-half-full/half-empty report,” Mr. Porter wrote in a note to clients. “The half-full portion is that the economy has finally managed to churn out back-to-back growth months for the first time since late 2007, and is emerging from the recession. The half-empty portion is that the recovery remains lacklustre, at best.”