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GDP growth to stall as auto production falls

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While the Canadian economy grew 3.9-percent rate in the first quarter, many economists are predicting a pull back in growth for the second quarter. Carlos Gomes, Senior Economist at Scotiabank, tells BNN that one major drag on the economy will be lower vehicle production.

“We are going to have a significant cut back from auto assemblies. Looking at the data we have so far for the month of April alone, we’ve seen roughly about a 25-percent cut in Canadian vehicle production,” he says. “What we’re seeing is that the impact of the auto industry cutbacks will slash GDP growth by about 0.8 percent.”

But Gomes says in the next year, production will begin to ramp up.

“We’re expecting that the big drop off [in vehicle production] that will come in the second quarter will then be fully reversed in the third quarter and we will see continued gains in the final months of 2011,” he says. “But the point is that it will act on a significant drag on Canadian economic activity.”
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