Canada’s economy misses BoC forecast, expanding 1 per cent annually in the third quarter
Canada’s economy grew 1 per cent annually in the third quarter, Statistics Canada said on Friday, as real gross domestic product (GDP) expanded by 0.1 per cent in September. The economic expansion is below the Bank of Canada’s forecast of 1.5 per cent annual growth, and a slower pace than the 2.1 per cent rise seen in the second quarter.
While quarterly results were in line with economist expectations, the monthly growth was weaker than expected, as analysts had forecast real GDP to grow 0.3 per cent in September. Advance estimates show the economy increased 0.1 per cent in October. Canada’s economy was unchanged in August, with GDP coming in at 0 per cent.
On a per capita basis, GDP fell 0.4 per cent in the quarter, marking the sixth consecutive quarterly decline.
CIBC economist Andrew Grantham noted that the weaker-than-expected end to the third quarter “suggests growth may not pick up as much as the Bank of Canada expects in Q4.” The central bank had forecast fourth quarter economic growth to come in at 2 per cent.
“Today’s GDP figures point to a weaker recent trend in activity than the Bank of Canada was expecting and is supportive of a 50 basis point cut at the December meeting, although next week’s employment figures are still likely more important in making a final determination,” CIBC economist Andrew Grantham wrote in a note on Friday.
Growth in the third quarter was led by higher household and government spending, offsetting slower growth in non-farm inventory accumulation, lower business investment capital and lower exports, Statistics Canada said.
Bank of Canada deputy governor Rhys Mendes said in a speech this week that the central bank will be closely watching a range of indicators, including Friday’s GDP data release, ahead of its next rate decision on Dec. 11. Mendes reiterates that “if the economy evolves broadly in line with our forecast, then it’s reasonable to expect further cuts to our policy rate.”
More to come.
Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.
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