Surprise! The U.S. economy is growing

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WASHINGTON, D.C. – Canada is hoping to mirror its southern neighbor as the U.S. shows signs of rebounding from the North American recession.

The U.S. Commerce Department says the American economy actually grew in the last three months of 2001, confusing experts.

Real U.S. Gross Domestic Product (GDP) rose at an annual rate of 0.2 per cent in the fourth quarter. That comes on the heels of a 1.3 per cent plunge the previous quarter. A recession is typically defined as two consecutive quarters of declining gross domestic product.

“It’s a huge surprise,” says Rob Palombi, an analyst with Standard & Poor’s MMS. “We may see the same happen in Canada.”

The Canadian picture will remain somewhat hazy until the end of next month when Statistics Canada will report its fourth quarter totals.

The news has flown in the face of post-Sept. 11, warnings of impending doom issued by most economists. But the long-term downturn hasn’t materialized south of the border.

“Almost everything that could have gone right in the fourth quarter went right,” says Doug Porter, senior economist at BMO Nesbitt Burns.

A growing number of forecasters are now predicting Canada’s economy grew during the last three months of 2001. GDP, the sum of all goods and services produced in Canada, fell 0.8 per cent in the third quarter.

The recent U.S. GDP report, while good news, doesn’t signal the recovery is well under way, warns Avery Shenfeld, senior economist at CIBC World Markets.

Preliminary U.S. GDP data, which is released a month faster than in Canada, is also prone to big revisions, Shenfeld says. “The first report can be out by a full percentage point.” n

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