Canada’s economy shows 0.1% growth in October

According to the latest report by Statistics Canada, the national economy grew slightly in October as the real gross domestic product exceeded its expectations.

Canada’s economy was up by 0.1%, while no changes were expected for the month.

The report says growth in services-producing industries, driven by increases in the public sector, wholesale and client-facing sectors, was partially offset by a drop in the goods-producing segment.

The overall output rose in 11 of 20 industrial sectors.

Statistics Canada says air transportation was up by 5.5% in October marking the highest activity level since February 2020’s pre-pandemic level.

However, in spite of nine months of consecutive increases, Statistics Canada noted that the air transportation activity level in October was still almost 34% lower than before the pandemic.

Performing arts, spectator sports, and heritage institutions industries showed a 4.7% gain due to more Toronto Blue Jays games than usual and a late beginning of the NHL pre-season.

Food services and drinking places saw activity growing by 2.1%, which was enough to offset a 1.6% decrease in accommodation services.

The slowdown in the goods-producing industries was led by a decline in mining, quarrying, and oil and gas extraction, as well as the manufacturing segment.

Although the initial estimate for November points to no changes in the real GDP, Statistics Canada warns that the estimate will be updated.

October’s results followed September’s revised increase in real GDP by 0.2%.

“This slower growth is aligned with our opinion that the lagged effects of interest rate increases and still high inflation are forcing Canadians to tighten their purse strings,” – James Orlando, director and senior economist with TD Economics, noted.

“Although there will be a lot of new economic data before the central bank’s next rate meeting in late January, we expect one more increase,” – he added. “As a result, the key lending rate will reach 4.5%.”

Most economists believe that economic growth will strongly depend on the ongoing effect of rate increases in the nearest future.

“The national economy has been holding up relatively well overall, mostly due to the service sector,”-  Robert Kavcic, senior economist with BMO Capital Markets, said.

“However, the main question is how things will change during the first half of 2023 when aggressive Bank of Canada rate increases start to work their way through the entire system.”