Canadian dollar lower, economic growth comes in stronger than expected

TORONTO – The Canadian dollar closed lower Friday despite a better-than-expected reading on economic growth.

The loonie was down 0.64 of a cent to 96.45 cents US as the greenback strengthened during the morning on positive manufacturing and consumer confidence data in the U.S.

Statistics Canada reported that the economy expanded at an annualized rate of 2.5 per cent during the first quarter, which was higher than the 2.3 per cent reading that had been expected.

The agency also revised growth for last year’s fourth quarter higher, saying GDP rose at an annualized rate of 0.9 per cent, versus the original reading of 0.6 per cent.

Statistics Canada also said that GDP growth for March came in at 0.2 per cent, higher than the 0.1 per cent rise that economists had expected.

In the U.S., a key reading on manufacturing in the U.S. Midwest came in much better than expected. The Chicago Purchasing Managers Index for May came in at 58.7, higher than the 49.9 reading that had been expected and a big improvement from the 3.5-year low of 49 posted in April. Any reading above 50 indicates expansion.

Other data showed that the final reading of the University of Michigan’s consumer sentiment survey for May edged up to 83.8, the best level in more than six years.

The Commerce Department also said consumer spending dropped a seasonally adjusted 0.2 per cent in April, the most since last May. That follows a 0.1 per cent increase in March.

Income was unchanged last month, after a 0.3 per cent rise in March.

Commodity prices also weighed on the loonie with July crude on the New York Mercantile Exchange down $1.64 to US$91.97 a barrel.

July copper edged two cents lower to US$3.29 a pound while June gold was down $19 to US$1,393 an ounce.