Economic growth moderates in third quarter
November 29, 2019
Focus Area—Canadian Economics
The Conference Board of Canada’s Economist Richard Forbes offers the following insights on today’s Gross Domestic Product data.
“Growth in the Canadian economy slipped in the third quarter but remained healthy overall, thanks largely to strong gains in business investment. However, Canada’s prospects for economic growth are subdued due to global trade tensions, which are negatively affecting the global economy. This will lead the Bank of Canada to cut interest rates early next year.”
- Real GDP grew a healthy 1.3 per cent at annual rates in the third quarter, marking a slowdown from the 3.7 per cent gain in the second quarter.
- Economic growth was largely driven by business investment, which rose 2.0 per cent. These gains were led by investment in engineering structures, which grew 3.1 per cent in the third quarter—its fastest pace since 2016.
- Residential investment rose 3.2 per cent in the third quarter quarter—its strongest gain since 2012. The growth comes at a welcome time as residential investment has fallen over the past two years.
- Household spending grew a modest 0.4 per cent. Despite solid income growth and employment gains, a rising household savings rate—which reached its highest level since 2015—tempered growth in household spending.
- Canada’s export performance held back its economic growth. Export volumes fell 0.4 per cent in the third quarter after posting a strong 3.1 per cent gain in the second quarter.
- This morning’s GDP report is in line with our most recent forecast, which has economic growth moderating in the third quarter. However, the Canadian economy is set for a period of slower growth due to the weakness in the global economy, leading the Bank of Canada to cut interest rates early next year.