Economy

Canadian economy seen strengthening, but analysts wary of Omicron impact – Reuters

Published

3 years ago

November 30, 2021

A construction crane is seen above Brookfield’s Bay Adelaide North, the third office tower to be constructed at their Bay Adelaide Centre complex property in Toronto, Ontario, Canada April 14, 2021. REUTERS/Chris Helgren/File Photo

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OTTAWA, Nov 30 (Reuters) – The Canadian economy roared back in the third quarter, with growth most likely accelerating in October on a manufacturing rebound, though economists were cautious on the looming impact of the Omicron COVID-19 variant.

Canada’s economy grew 5.4% in the third quarter on an annualized basis, beating analyst expectations for a gain of 3.0%, Statistics Canada data showed. A preliminary estimate for October showed a gain of 0.8%, while September’s GDP was in line with expectations for a 0.1% rise.

Statscan revised down annualized second-quarter GDP to a contraction of 3.2% from a previous dip of 1.1%. But with the October gain, economic activity is now just 0.5% below pre-pandemic levels.

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“The October increase was maybe more encouraging for the speed of recovery even than the third quarter numbers,” said Nathan Janzen, senior economist at Royal Bank of Canada.

“There is a lot of uncertainty right now about how long this can be sustained just given … the Omicron variant.”

The third-quarter rebound was driven by one of the largest household spending sprees on record, as COVID-19 restrictions were eased and consumers bought everything from clothing to personal grooming services. Exports were also up, led by crude oil.

“We had a pretty strong showing in consumer spending. So that was nice to see after the weakness we had in the second quarter,” said Jimmy Jean, chief economist at Desjardins Group.

“But now the question is what’s going to happen in fourth quarter,” he added, pointing to both the emergence of the Omicron variant and flooding in the western province of British Columbia that cut off a key port from the rest of Canada. “It seems the more we go into the quarter the risk has tilted to the downside.”

Canada has reported five cases of the Omicron variant. The health minister in the province of Quebec warned residents to rethink holiday travel. read more

The Bank of Canada last month signaled it could start hiking rates as soon as April 2022, with inflation set to stay above target through much of next year due to supply chain bottlenecks and high energy prices. read more

The Canadian dollar was trading 0.2% lower at 1.2768 to the greenback, or 78.32 U.S. cents. Investors are pricing in a first rate hike in either March or April. BOCWATCH

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Additional reporting by David Ljunggren and Steve Scherer, and Fergal Smith in Toronto; Editing by Andrew Heavens and Paul Simao

Our Standards: The Thomson Reuters Trust Principles.

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Economy

How will the U.S. election impact the Canadian economy? – BNN Bloomberg

Published

1 day ago

November 4, 2024

Harry Miller

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How will the U.S. election impact the Canadian economy? BNN Bloomberg

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Economy

Trump and Musk promise economic 'hardship' — and voters are noticing – MSNBC

Published

5 days ago

October 31, 2024

Harry Miller

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Trump and Musk promise economic ‘hardship’ — and voters are noticing MSNBC

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Economy

Economy stalled in August, Q3 growth looks to fall short of Bank of Canada estimates

Published

5 days ago

October 31, 2024

Anne Joseph

OTTAWA – The Canadian economy was flat in August as high interest rates continued to weigh on consumers and businesses, while a preliminary estimate suggests it grew at an annualized rate of one per cent in the third quarter.

Statistics Canada’s gross domestic product report Thursday says growth in services-producing industries in August were offset by declines in goods-producing industries.

The manufacturing sector was the largest drag on the economy, followed by utilities, wholesale and trade and transportation and warehousing.

The report noted shutdowns at Canada’s two largest railways contributed to a decline in transportation and warehousing.

A preliminary estimate for September suggests real gross domestic product grew by 0.3 per cent.

Statistics Canada’s estimate for the third quarter is weaker than the Bank of Canada’s projection of 1.5 per cent annualized growth.

The latest economic figures suggest ongoing weakness in the Canadian economy, giving the central bank room to continue cutting interest rates.

But the size of that cut is still uncertain, with lots more data to come on inflation and the economy before the Bank of Canada’s next rate decision on Dec. 11.

“We don’t think this will ring any alarm bells for the (Bank of Canada) but it puts more emphasis on their fears around a weakening economy,” TD economist Marc Ercolao wrote.

The central bank has acknowledged repeatedly the economy is weak and that growth needs to pick back up.

Last week, the Bank of Canada delivered a half-percentage point interest rate cut in response to inflation returning to its two per cent target.

Governor Tiff Macklem wouldn’t say whether the central bank will follow up with another jumbo cut in December and instead said the central bank will take interest rate decisions one a time based on incoming economic data.

The central bank is expecting economic growth to rebound next year as rate cuts filter through the economy.

This report by The Canadian Press was first published Oct. 31, 2024

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