According to data, Canada’s economy expanded much more quickly than expected in the third quarter as crude oil exports and government spending boosted economic activity, despite disappointing business investments and household consumption as a result of the country’s persistent trade uncertainty.
According to Statistics Canada, the third-quarter annualized gross domestic product (GDP) increased by 2.6 percent on Friday, avoiding what might have been a technical recession after a downwardly revised 1.8% contraction the previous quarter.
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The Bank of Canada won’t cut interest rates until December 10th, according to economists’ predictions.
Unlike the monthly GDP, which is derived from industrial output, the quarterly GDP reading is based on income and expenditure.
Because the US government shutdown’s most recent release prevented the third-quarter number from being released in February, according to the statistics agency, the third-quarter number may be subject to a larger-than-normal revision.
Analysts polled by the Reuters news agency had predicted monthly GDP growth of 0.2% and annualized growth of 0.5% in the third quarter.
According to StatsCan, the economy matched analysts’ predictions on a month-over-month basis, primarily driven by a 1.6% increase in manufacturing output, which was down from the previous month.
However, an earlier estimate predicted a negative start to the fourth quarter, with GDP dropping by 0.3% in October.
In comments made to Al Jazeera by senior economists Michael Davenport and Tony Stillo, head of Canada Economics at Oxford Economics, said that “the headline growth was flattered by a significant drop in imports that masked underlying weakness in domestic demand.”
We continue to believe that the Canadian economy is fragile and anticipates that the US’s tariffs, uncertainty in trade policy, and slower population growth will cause it to grow.
Tariff imposed
Canadian exports have suffered greatly from US tariffs on crucial sectors. Work losses, sluggish hiring, and subdued business and consumer sentiment have all been the result of them, which has caused predictions of a near-recessionary environment.
However, higher crude oil exports and a 2.9 percent increase in government capital investments, as reported by StatsCan, helped at least some of the impact. Additionally, higher crude oil exports and higher corporate income in the third quarter, as shown by StatsCan’s data, helped cushion the impact.
The rise in government investments was primarily driven by the increase in money spent on nonresidential structures like hospitals and weaponry.
A rise in residential resale activity and renovations also helped.
According to Doug Porter, chief economist at BMO Capital Markets, the report “should stop the recession chatter for now.”
The Bank of Canada announced last month that it would maintain its key interest rate at 2.25 percent until a significant shift in the economy’s outlook is detected.
However, the GDP data showed that the underlying impact of tariffs, as well as the GDP data, continues to be reflected in business and consumer sentiment.
The third quarter’s business capital investment remained unchanged, while household final consumption expenditure decreased by 0.1 percent.
StatsCan added that the period saw a decline in new residential construction of 0.8 percent.
Source: Aljazeera
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