The Conference Board of Canada’s Principal Economist Alicia Macdonald offers the following insights on the gross domestic product data for October.
“Real GDP bounced back in October but this stronger growth is not expected to be sustained over the remainder of the year. With inflation and economic growth slowing, the Bank of Canada is not expected to raise interest rates until March.”
—Alicia Macdonald, Principal Economist, The Conference Board of Canada
- After declining in September, monthly GDP bounced back in October, with growth of 0.3 per cent. Growth was broad based with gains across most industries.
- The manufacturing sector posted strong growth in October after declines in the preceding two months.
- An atypically large number of security transactions in the month drove output in finance and insurance higher, and oil and gas mining accelerated sharply after production issues earlier this year. Strong growth observed in these sectors is not expected to be sustained, especially given the forthcoming production cuts in Alberta.
- Retail trade increased by just 0.1 per cent in October. Consumer spending has been slowing over recent months as households adjust to higher interest rates, a trend we expect will continue over the near term.
- Earlier this week, Statistics Canada released inflation data for November that showed a sharp deceleration in price growth. After increasing by 2.4 per cent in October, inflation slowed to 1.7 per cent last month due to a year-over-year decline in gasoline prices.
- Stripping out the effect of gasoline, prices rose 1.9 per cent in November. The Bank of Canada’s core measures also all clocked in at 1.9 per cent for the month—down from an average of 2 per cent in October as CPI-trim and CPI-median posted softer growth.
- Despite the rebound in October GDP, we continue to expect a slowdown in economic growth over the last part of 2018, as outlined in our recently released Canadian Outlook. With inflation and economic growth cooling, the Bank of Canada is expected to remain on the sidelines until March.