Canada: GDP growth slows in October as recovery loses steam
The economy grew 0.4% month-on-month in October, easing from September’s 0.8% increase, although marginally beating Statistics Canada’s preliminary estimate of 0.2% made back on 1 December. Economic activity shrank 3.5% year-on-year in October, which was softer than September’s 3.8% drop.
In October, growth in the goods-producing industries continued to ease, particularly due to a fall in manufacturing activity. That said, growth in the utilities and construction sectors returned in October. In terms of service-producing industries, the retail trade and, transportation and warehousing sectors increased, albeit at a noticeably softer pace relative to the previous month.
Moreover, Statistics Canada also released a special flash GDP estimate for November to provide a snapshot of the state of the economy. The preliminary figure pointed to a 0.4% increase in activity on a month-on-month seasonally-adjusted basis. Although a detailed breakdown was not released, the flash estimate attributed November’s growth to the manufacturing, wholesale trade and, finance and insurance sectors.
In 2021, the economy is expected to rebound robustly as the impact of Covid-19 and subsequent lockdown measures fades. Moreover, strong fiscal and monetary stimulus, coupled with a recovery in labor market conditions, should propel domestic demand. Nevertheless, the recent tightening of lockdown measures due to a spike in new Covid-19 cases and, the timing and distribution of a Covid-19 vaccine remains a key downside risk to the outlook.
Commenting on October’s GDP reading, Sri Thanabalasingam, a senior economist at TD Economics, noted:
“Indeed, the health and economic landscape have shifted significantly since October. The spread of the virus has become even more alarming and provinces are reacting with strong measures. Lockdowns in Alberta and Ontario point to an economic contraction in December, and possibly January. Only as health outcomes improve, can the economy find its legs. Let’s hope this happens sooner rather than later.”