The Canadian economy began to grow rapidly in the third quarter, with growth likely to pick up in October due to a rebound in production, although economists were wary of the impact of the new coronavirus strain.
Canada’s economy grew 5.4% year-on-year in the third quarter, beating analysts’ expectations of 3.0% growth, according to Statistics Canada. The preliminary estimate for October showed growth of 0.8%, while GDP for September was in line with expectations for growth of 0.1%.
Statscan lowered its annual GDP for the second quarter to a 3.2% contraction from the previous 1.1% decline. But with October growth, economic activity is now just 0.5% below pre-pandemic levels.
“The October rally was arguably more encouraging for the speed of the recovery even than the Q3 figures,” said Nathan Janzen, senior economist at Royal Bank of Canada.
“There is now a great deal of uncertainty about how long this might last given … the Omicron strain.”
The third-quarter recovery was fueled by one of the largest spikes in household spending on record, as restrictions on COVID-19 were eased and consumers began buying everything from clothing to personal care. Exports also rose, primarily driven by crude oil.
“We had pretty good consumer spending figures. So it was nice to see after the weakness we had in the second quarter, ”said Jimmy Jean, chief economist at Desjardins Group.
Canada has reported five cases of infection with the Omicron strain. Quebec’s health minister has called on residents to rethink vacation travel.
The Bank of Canada said last month that it could start raising rates as early as April 2022, with inflation remaining above target for most of next year due to supply chain bottlenecks and high energy prices.
The Canadian dollar was down 0.2% at 1.2768 per dollar. Investors expect an immediate rise in prices either in March or in April.