Canadian dollar declines amid stronger than expected economic growth

Photo: The Canadian Press. All rights reserved.

Loonies are pictured in Vancouver, Sept. 22, 2011. THE CANADIAN PRESS/Jonathan Hayward

TORONTO - The Canadian dollar closed lower Friday despite signs of stronger than expected economic growth and rising commodity prices.

The loonie was off 0.3 of a cent to 94.16 cents US as the American greenback strengthened against other currencies.

Statistics Canada reported that gross domestic product grew at an annualized rate of 2.7 per cent during the third quarter. That was better than the 2.5 per cent pace that economists had expected.

GDP growth in September was ahead 0.3 per cent versus the 0.2 per cent rise that had been expected.

At the same time, the agency revised second-quarter growth downward to 1.6 per cent from 1.7 per cent.

Oil prices moved higher after losing ground over the past four sessions because of concerns of rising supplies in the U.S. Data released on Wednesday showed inventories up last week for a 10th week in a row.

Oil has declined from about US$110 in September due to reduced tensions in the oil-rich Middle East but, mostly, to muted demand and high supplies.

On Friday, the January crude contract on the New York Mercantile Exchange climbed 42 cents to settle at US$92.72 a barrel.

February bullion rose $12.50 to US$1,250.40 a barrel while March copper gained 1.5 cents to US$3.21 a pound.

In Europe, the focus was on official inflation and unemployment data. Both were encouraging, from the European Central Bank’s perspective at least.

Eurostat, the EU’s statistics office, reported a rise in the 17-country eurozone’s inflation rate to 0.9 per cent in November from October’s near four-year low of 0.7 per cent. Analysts said that will likely ease fears at the ECB of an imminent slide into deflation.

Falling prices can cause a protracted slide in consumer spending as individuals postpone spending in the hope of getting a better bargain down the line.

Also, the statistics office reported that the number of people unemployed in the region fell by 61,000 in October. That was the first fall since April 2011 and may signal that the recovery from recession may start to be helping the labour market.