It doesn’t look as though there will be a technical recession in Canada -- not yet, at least.
Figures released Wednesday morning by Statistics Canada indicated that the economy actually grew in this year’s third quarter, by a higher-than-expected 3.5%, a far cry from the 0.5% decline we saw in Q2. Experts predicted growth of merely 3.0%.
The jump in third-quarter Gross Domestic Product was attributed mostly to net exports contributing 5.2 percentage points to growth following the sizeable 6.1-percentage-point reduction in Q2. A report issued soon after the release of the figures by RBC Economics Research pointed to "exports rising an annualized 14.4% in the quarter after dropping 6.2% the previous quarter.
"Imports also made a contribution," Canada’s largest bank continues, “to the improvement in net exports falling 3.2% after the 13.6% surge in Q2."
RBC goes on to say the strong gain in Q3 GDP supports the view that the Q2 decline reflected a number of transitory negative factors. "These factors include the supply-chain problems in the motor vehicle sector that emanated from the natural disasters in Japan in March.
"As well, wildfires in Northern Alberta that contributed to numerous shutdowns of oil sand production facilities. These factors contributed to the weakness in Q2 exports. However, the boost to Q3 growth provided by the reversal of these factors is not expected to continue to the same extent into the fourth quarter."
The bank concludes by urging Canadians not to get too comfortable as the year winds down. "(For) the average quarterly rate over the second half of this year is about a percentage point higher than was forecast by the Bank of Canada in its latest forecast released in October.
"Stronger-than-expected growth on its own would argue for less monetary policy accommodation. However, the central bank has made clear it sees the main downside risks as external to the Canadian economy," citing European bank influences that have plagued much of the world economy this fall.
