Canada’s economy bounced back in November, recovering from the slump in October, as a brisk month for manufacturing, resource extraction and construction outweighed a slowdown in the real estate business.
Statistics Canada said real gross domestic product rose 0.4 per cent in November from October, more than making up for October’s revised 0.2-per-cent drop. The October figure was originally reported as a 0.3-per-cent decline.
Economists noted that November’s growth was broad-based, and topped economists’ consensus forecast of a 0.3-per-cent increase.
The better-than-expected November result, combined with the upward revision of the October numbers, suggests the economy may have grown a little more than previously thought in the final quarter of 2016, economists said.
The Canadian dollar rose nearly a half-cent against its U.S. counterpart on the GDP news, topping 77 cents (U.S.) in mid-morning trading. By noon, the loonie had given back some of those gains and was trading at 76.77 cents (U.S.).
Goods-producing sectors grew 0.9 per cent in the month, while services rose 0.2 per cent.
Several key goods sectors showed strong rebounds after a disappointing October. Manufacturing jumped 1.4 per cent, rebounding from a 1.7-per-cent slump in October. Mining and oil and gas extraction also rose 1.4 per cent, after slipping 0.5 per cent in October. Construction rose 1.1 per cent, reversing a 0.6-per-cent drop the previous month.
But real estate services dropped 0.2 per cent, their first month-over-month decline in two years. The government statistical agency attributed the decline to new government mortgage-lending rules designed to tap the brakes on the housing market, which went into effect in mid-October. It said real estate agent and broker activities slumped 6.2 per cent month over month.
The utilities sector also slumped 3 per cent month over month, reflecting a decline in demand due to unseasonably warm weather in Western Canada.
“The consensus-beating figures today, combined with the [October] revisions, should have growth in the fourth quarter tracking close to 2 per cent [annualized],” said Canadian Imperial Bank of Commerce economist Nick Exarhos in a research note. That would be comfortably above the Bank of Canada’s most recent estimate, released two weeks ago, of 1.5-per-cent growth in the quarter.
“That should remove further the possibility of a near-term [interest-rate] ease from the BoC,” Mr. Exarhos said.
The November figures got an additional lift from a 1.5-per-cent surge in the finance and insurance sector, the biggest one-month gain in nearly two years, amid unusually busy financial-market activity. The jump likely reflected Donald Trump’s surprise win in the U.S. presidential election in early November, “which saw pronounced movements in asset markets in the days after the vote,” Mr. Exarhos said.
Paul Ashworth, chief North American economist at Capital Economics, also noted that the weather-related drag on the November numbers from the utilities sector is likely to reverse. “The weather returned to seasonal norms in December, which should provide a boost to December GDP,” he wrote in a research note.
But while the November numbers suggest Canada’s economic recovery is generally gaining momentum, economists remain cautious, noting that new risks are emerging.
“Over all, the drag on the economy from the oil price slump has finally faded, but the decline in real estate is a sign that the nascent housing downturn represents a new drag on economic growth,” Mr. Ashworth said. “It also remains to be seen whether the Trump administration’s policies will be a positive (via fiscal stimulus) or negative (border adjustment, protectionism) for Canada.”