Canada's economy gave itself something of an early Christmas gift.
Figures released this morning by Statistics Canada show annualized third-quarter Gross Domestic Product growth strengthened to 2.7% from a downwardly revised 1.6% in the second quarter, initially estimated as increasing 1.7%. Market expectations going into the report were for a slightly weaker Q3 increase of 2.5%.
The nation's number-crunchers said the quarter saw modest increases in most of the major expenditure categories. Consumer spending rose a slightly stronger-than-expected 2.2% though this was down from a 3.6% jump in Q2. Similarly residential investment rose 2.4% down from a 6.8% in the previous quarter. Non-residential investment rose 2.2% with the structures component up 2.1% and machinery and equipment up 2.5%.
Though the overall increase in non-residential investment reversed the 1.3% decline in Q2, it was disappointingly weak. For overall GDP growth to continue to grow at an above potential rate, greater strength will be needed from non-residential investment going forward as high household debt levels are expected to increasingly weigh on consumer spending and residential investment.
Also released this morning was the September GDP report which increased a stronger-than-expected 0.3% matching a similar-sized increase in August. Market expectations going into the report were for a more modest 0.2% increase.
The Bank of Canada’s October economic forecast had projected a weaker Q3 growth rate of 1.8%. "Stronger growth implies an earlier closure of the output gap," according to experts at RBC Economics, "and thus reason to advance expectations of a return to tightening mode by the Bank of Canada.
"However, " the bank concludes, "the recently released October CPI indicated weaker-than-expected inflation with both the headline and core rate at or below the lower end, rather than the mid-point, of the central bank’s target range for inflation of 1% to 3%."
