Canadian economy slows in the third quarter

Strength in mining and petroleum refineries boosted growth in the third quarter: StatsCan

Mario ToneguzziCanada’s real gross domestic product (GDP) grew 0.5 per cent in the third quarter, following a 0.7 per cent increase in the second quarter.

Expressed as an annualized rate, real GDP was up 2.0 per cent in the third quarter, according to Statistics Canada.

In comparison, real GDP in the United States grew 3.5 per cent, said the federal agency on Friday.

“Strength in mining and petroleum refineries boosted growth in the third quarter. These industries benefited from higher prices and foreign demand. Generally, production recoveries drew on domestically produced inputs. Strength was also evident in service industries including real estate. Overall corporate earnings increased in the third quarter, led by a 3.0 per cent nominal increase in the gross operating surplus of non-financial corporations,” said StatsCan.

“Growth in household spending slowed from 0.6 per cent in the second quarter to 0.3 per cent in the third quarter. Outlays for durable goods declined 0.7 per cent, as motor vehicles purchases (-1.6 per cent) fell for the third straight quarter. A 1.4 per cent rise in outlays for semi-durable goods pushed overall goods spending to 0.2 per cent. Household spending on services slowed to 0.3 per cent, following 0.8 per cent growth in the second quarter.

“Total residential investment (-1.5 per cent) continued to fall in the third quarter. Investment in new residential construction declined 4.7 per cent, the largest decrease since the second quarter of 2009. Renovation outlays (-2.0 per cent) were also down. However, ownership transfer costs rose 7.1 per cent following two quarters of declines.”

The federal agency said non-residential investment in buildings and engineering structures fell 1.3 per cent in the third quarter, following six consecutive quarterly increases.

“After a brief bounce in the middle of the year, Canadian growth has settled back down to a trend-like pace of around two per cent – which is close to what we expect it to average both this year and next,” said Doug Porter, chief economist with the BMO Financial Group.

“However, we would readily recognize that the details of today’s release, along with the news flow from the global economy as well as weaker oil prices, suggest the risks are skewed lower looking ahead to Q4 and into 2019. While the market continues to bravely assume the Bank of Canada will hike rates in early January, today’s details reinforce the message that it is still a close call, and may well require a marked improvement in oil prices to get there.”


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