Canada's economy grew 1% in the third quarter from higher government, household spending
Bank of Canada's October forecast for GDP was 1.5 per cent
Canada's economy grew at an annualized rate of 1% in the third quarter, driven by increased household and government spending, according to data released by Statistics Canada on Friday.
While this growth matched economists' expectations, it fell short of the Bank of Canada's projection of 1.5%. The increase in GDP was tempered by reduced business investment, particularly lower spending on machinery, including aircraft, as well as a decline in exports that outpaced the drop in imports.
Household spending contributed to growth through purchases of new trucks, vans, sports vehicles, and financial services, although spending on food services and accommodation saw a decline. Government spending also increased for the third consecutive quarter.
Despite these gains, GDP per capita dropped by 0.4% in the third quarter, marking the sixth consecutive quarterly decline. Additionally, Statistics Canada revised second-quarter annualized growth upward to 2.2% from an initial estimate of 2.1%.
The latest GDP figures, along with an upcoming jobs report, are expected to play a significant role in shaping the Bank of Canada's decision regarding an anticipated interest rate cut during its final policy meeting of the year on December 11. The employment data, due next week, will be the last major economic indicator before the decision.
"Despite the positive historic revisions and better underlying detail within the Q3 data, today's GDP figures point to a weaker recent trend in activity than the Bank of Canada was expecting," noted Andrew Grantham, chief economist at CIBC Capital Markets. He added that the data supports the likelihood of a 50-basis-point rate cut in December, though next week's employment report will hold greater weight in the central bank's final determination.
