OTTAWA: Canada’s economy grew for the first time in three quarters with gains in automotive exports and consumer spending overtaking the damage from lower oil prices.
The quarter ended with a monthly contraction of 0.5 per cent for September, the largest since March 2009, as fires and maintenance shutdowns interrupted oil production.
Gross domestic product expanded at a 2.3 per cent annualised pace from July to September, Statistics Canada said Tuesday in Ottawa, matching the median of a Bloomberg economist survey with 26 responses.
Canada’s “two-speed” economy — defined by low oil prices and momentum outside of the energy sector — needs until the middle of 2017 to get back to full capacity, Bank of Canada Governor Stephen Poloz predicts. The central bank makes its next interest-rate decision Wednesday.
Poloz cut interest rates in January and July to counteract the oil price shock, which led to a depreciation of the country’s currency and is providing a boon to automakers and other goods makers.
Exports rose 9.4 per cent in the third quarter led by automobiles and consumer goods, while imports declined 2.9 per cent, Statistics Canada said. Consumer spending gained at a 1.8 per cent annualised pace.
The pace of growth was slowed by a 3 per cent decline in business investment, the third drop in a row. Government expenditures also declined by 1.6 per cent.
Third-quarter growth almost matches the Bank of Canada’s most recent forecast for a 2.5 per cent increase. The central bank also said output growth would slow to a 1.5 per cent pace between October and December before picking up to a rate of 2.7 per cent in the second half of next year.
The output contraction for September lagged Bloomberg economist forecasts that it would be little changed. Much of the decline was linked to a 5.5 per cent drop in oil and gas extraction. Some of that weakness may be temporary — oil production in September was hampered as a fire curbed production from Syncrude Canada Ltd’s upgrader in Alberta, and Nexen Energy said it was shutting its Long Lake unit.
The drop in Canada’s prices for exported crude oil and other commodities shrank the economy in the first half of the year, with most economists saying the declines of less than 1 per cent were too small to be considered a true recession.
Layoffs and cancelled investments at resource companies in the province of Alberta such as Talisman Energy Inc. have accounted for much of the damage in Canada this year.
Statistics Canada today reduced its estimates of the contractions in the first half, saying GDP shrank 0.7 per cent in the first quarter and 0.3 per cent in the first quarter. Earlier it has said the contractions were 0.8 per cent and 0.5 per cent.
