Canada exits recession with 2.3 percent growth in Q3

Exports drove third-quarter growth in Canada, advancing 2.3% in the quarter on sales of motor vehicles, consumer goods and crude oil.

As expected, business investment remained the sore spot in the Canadian economy, contracting a further 2.8% (Q2: -6.0%).

Inflation as measured in CPI has been close to zero for most of this year – a step down from the average rates of 2013 and 2014.

Gross domestic product expanded at a 2.3 percent annualized pace from July to September, Statistics Canada said Tuesday in Ottawa, matching the median of a Bloomberg economist survey with 26 responses.

GDP in oil and gas extraction fell by 5.5 per cent in just one month. In first and second quarters of this year, GDP declined by a revised 0.7 and 0.3 per cent, respectively, a slight improvement from previous estimates by the federal data agency.

Even so, the Canadian economy still performed at a better pace in the third quarter than the United States, which posted an annualized increase in Q3 GDP of 2.1 per cent.

The Canadian economy has climbed out of the recession that emerged in the first half of 2015 – but the rebound has already shown signs of lost momentum.

Earlier this year, the economy fell into a “technical recession” after it recoiled for two straight quarters. Economists had expected growth of 2.4 per cent for the third quarter, according to Thomson Reuters.

Household spending, meanwhile, grew by 0.4% in the third quarter, the agency notes.

Canada’s growth forecasts have been downgraded several times in recent months as the negative impact of near record low oil prices have made themselves felt throughout the economy. This has been driven by low prices for goods in the CPI basket – as goods-based inflation has been “firmly negative”- and a dip in services inflation, though it has been steady at around 2.5 per cent for much of the year.

On Wednesday Canada’s central bank meets to decide the level of interest rates. Real GDP fell -0.5% month-on-month in June, on the back of an outsized drop in mining and quarrying activity (effectively the oil and gas sector), which was down -5.1% on the month.

Exports of autos and other goods pitched in in a big way last quarter – a sorely needed development that suggests manufacturing is at last moving to fill the void left by oil and resource firms who are pulling back.