Canada: GDP growth edges down in Q3
Economic growth edged down in the third quarter, with GDP expanding 2.9% in seasonally-adjusted annualized terms (SAAR) (Q2: +3.2% SAAR). However, the reading was close to double market expectations.
Private consumption contracted 1.0% in Q3, marking the worst result since Q2 2021 (Q2: +9.5% SAAR) and driven by lower spending on goods. Government consumption rebounded, growing 5.3% in Q3 (Q2: -2.0% SAAR). Meanwhile, fixed investment fell at a milder pace of 5.0% in Q3, compared to the 8.4% contraction logged in the prior quarter. This came on the back of a milder—but still pronounced—fall in residential investment.
On the external front, exports of goods and services growth picked up to 8.6% in seasonally adjusted annualized terms in the third quarter (Q2: +8.1% SAAR), buoyed by higher exports of crude oil and bitumen. Conversely, imports of goods and services contracted 1.5% in Q3 (Q2: +29.5% SAAR).
On an annual basis, economic growth moderated to 3.9% in Q3, following the previous quarter’s 4.7% increase.
Flash data for October indicates the economy broadly flatlined in the month, as increases in the public, transportation and warehousing, construction and wholesale trade sectors were offset by decreases in the manufacturing and mining, quarrying and oil and gas extraction sectors. Over Q4 as a whole, our Consensus is for a slight GDP contraction as tighter monetary policy bites.
On the Q3 reading and outlook, Desjardins Randall Bartlett said:
“Q3 real GDP growth may have beaten the Bank of Canada and consensus call, but the devil is in the details. With domestic demand falling in the quarter, the headline number was likely more of a head fake than an indicator of economic strength […] Looking through the volatility, we continue to see Canada as heading towards recession in 2023.”