Canadian economy - same story, different GDP route
Canada’s real GDP contracted at an annualized rate of 1.1% in the third quarter
By Mark Parsons, ATB Economics 30 November 2023 1 min read
A surprising Canadian GDP report this morning. The third quarter fell much more than expected, but the second quarter was revised up sharply. A bit of a GDP rollercoaster, but today’s report does not change the storyline that Canada’s economy has effectively ground to a halt.
The numbers: Canada’s real GDP contracted at an annualized rate of 1.1% in the third quarter, much weaker than the Bloomberg consensus of a modest increase. Exports, business investment and inventories weighed on the Q3 reading, partly offset by stronger housing investment and government spending. The consumer has pulled way back, with spending flat for the second straight quarter. In contrast, second quarter GDP expanded at an annual clip of 1.4%, revised up from -0.2% previously.
In summary, a similar landing spot, but a different route. We can hold off on the ‘technical recession’ talk (for now), as the economy did not register two straight quarterly declines (see “what is a recession anyway”). The contrast with our southern neighbour is stark, where U.S. third quarter real GDP ran very hot at 5.2% (annualized) following a 2.1% gain in Q2.
Implications? Not the outcome many were expecting, but the main story is the same. The Canadian economy has cooled dramatically under the weight of higher interest rates, and we expect the Bank of Canada to hold again next month. Tomorrow’s jobs report is the last big release before the Bank’s December 6 decision.
Closer to home, we don’t get a provincial breakdown, but the monthly numbers tell us about industries more relevant to Alberta. In the oil sands, GDP edged down slightly (-0.1%) in September, while conventional oil and gas slipped 3.6% with Statistics Canada citing maintenance work on an oil platform off the Atlantic coast. Advance estimates suggest that oil and gas activity picked up in October, contributing to a 0.2% improvement in Canada’s overall GDP to kick off the final quarter of the year.
Answer to the previous trivia question: French architect Le Corbusier described grain elevators [and factories] as ”the magnificent first-fruits of the new age” in his book Towards a New Architecture.
Today’s trivia question: The nationwide rationing of what product went into effect in the U.S. on December 1, 1942?