Canada’s economic growth slowed at the end of the third quarter, casting doubts on the strength of the nation’s recovery.
Gross Domestic Product (GDP) was little changed in September, according to a preliminary estimate from Statistics Canada, while the expansion was a slower than expected 0.4% in August. In all, for the third quarter, the economy grew by 0.5%, or an annualized 2%.
Economists were anticipating 4% annualized growth in Canada for the July through September period, according to the median estimate of a survey by Bloomberg Markets.
The new economic data casts doubt on the Bank of Canada’s ability to start a cycle of interest rate increases early next year, as investors are anticipating, to combat rising inflation.
The Canadian dollar fell 0.4% to $1.2389 per U.S. dollar on the news, paring all of its gains since the Bank of Canada accelerated its timeline for potential rate hikes on October 27.
Canada’s central bank had forecast economic growth for the third quarter of 5.5%, even as it ramped up its estimates of inflation.
The latest economic data suggests that the supply chain disruptions that have been intensifying in recent months are significantly weighing on Canada’s economic recovery.
September’s stall was led by drops in retail and manufacturing, according to Statistics Canada. For August, global supply chain issues held back sales of furniture and motor vehicles.
While economists largely expect the supply chain disruptions to ease in coming months, there’s more uncertainty on how long they will last.
Canada isn’t alone. U.S. economic growth in the third quarter slowed to the softest pace of the pandemic recovery period amid supply disruptions. GDP south of the border grew at a 2% annualized rate following a 6.7% expansion in the second quarter, the U.S. Commerce Department’s preliminary estimate showed.
