Canada’s GDP grows 0.8% in October – Update

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By Paul Vieira

OTTAWA – Canada’s gross domestic product grew in October at its fastest pace in seven months, suggesting the economy was in high gear early in the fourth quarter before concerns arose over the Covid-19 Omicron variant.

Canada’s GDP, which tracks general economic activity, climbed 0.8% in October from the previous month to C $ 2.2 trillion, seasonally adjusted, the equivalent of about 1.56 trillion US dollars. October’s advance matched the market consensus, according to economists at TD Securities.

The previous month, GDP grew by 0.2% revised.

Meanwhile, Statistics Canada said an early estimate for November suggests GDP grew 0.3%, which would mark the sixth consecutive month of acceleration in output. This estimate is considered preliminary and subject to revision.

Including the November estimate, Canadian production by industry is approaching pre-pandemic levels, just 0.1% below the data for February 2020. Canada’s monthly GDP report incorporates production at the level of l ‘industry. Quarterly GDP data take into account production at the industry level, as well as expenditure and investment.

The Bank of Nova Scotia’s economics team said indicators for October and November suggest the Canadian economy is on track for an annualized growth rate of 6.6% in the fourth quarter, faster than an increase of 5.4% from July to September. The Bank of Canada forecasts a 4% annual rate gain for the fourth quarter.

However, economists warn that Canada’s GDP is likely to lag late in the fourth quarter due to two factors: severe flooding in British Columbia, which upended activity in Canada’s third most populous province; and further restrictions from regional authorities to curb a sharp rise in Covid-19 cases due to the Omicron variant.

The country’s seven-day average, on an adjusted basis, increased on December 22 to its highest level since the start of the pandemic, doubling more in the space of a week. The number of cases in Canada is just over half of what it is in the United States on a per capita basis, while at the start of the month it was at one-third of American levels. Regional authorities have either closed businesses, such as gymnasiums and bars, or imposed capacity limits.

Nonetheless, the October report and the November estimate indicate that economic growth in the fourth quarter will be stronger than expected by the Bank of Canada, “and means the bank might not be too concerned about the further disruption due to the deteriorating coronavirus situation, ”Capital Economics said in a note to clients.

The rapid spread of Covid-19 in December portends a weak first quarter for 2022, the forecasting firm added. “But given the stronger starting point in the fourth quarter, the negative effect of these restrictions – which will ultimately be temporary – may not delay the bank’s tightening plans.”

The Bank of Canada has indicated that it may be ready to increase its benchmark interest rate starting in the second quarter of 2022, when it expects the economic slowdown to be absorbed.

GDP data for October indicated that manufacturing, construction and real estate fueled the advance, which was the largest month-over-month increase since last March.

Write to Paul Vieira at [email protected]

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