The Conference Board of Canada economists Liam Daly and Kiefer Van Mulligen offer insights on the latest gross domestic product (GDP) data:
“Following a 0.9 per cent increase in August, real GDP grew by 0.8 per cent in September. These modest figures, as well as a preliminary estimate of 0.2 per cent growth for October, show that escalating cases of COVID-19 and stricter public health measures have weighed heavily on Canada’s economic recovery, ”
said Liam Daly.
“Real GDP grew by 8.9 per cent in the third quarter, in line with our national forecast. With the reopening of the Canadian economy, specific segments of household consumption and international trade have picked up, and the fall in unemployment has benefited the government’s balance sheet. Nonetheless, sluggish investment growth and reintroduced economic restrictions in the autumn signal a protracted recovery,”
said Kiefer Van Mulligen.
GDP by industry in September
- Most industries remain below their pre-pandemic levels. Real GDP in September sat 4.6 per cent below its February level. Yet, evidence of a “K-shaped” recovery is clear, with some sectors having rebounded fully and others lagging in recent months.
- Retail trade, finance and insurance, real estate and rental and leasing, and agriculture, forestry, fishing and hunting are notable areas of strength.
- The arts, entertainment and recreation industry posted the largest month-over-month percentage growth in September (up 5.2 per cent), though it remains the furthest from a full recovery (behind its February level by 45.5 per cent). The mining, quarrying, and oil and gas extraction industry declined in both the second and third quarters, but expanded by 4.1 per cent and contributed most to overall growth in September.
- Increased activity in oil and gas and oil sands extraction, and support activities for mining and oil and gas extraction offset monthly declines in potash mining and other non-metallic mineral mining and quarrying.
- Economic activity in the accommodation and food services sector, heavily impacted by public health measures and modest consumer confidence, dropped by 0.2 per cent in September.
- As one of the hardest hit sectors in the second quarter, output in the accommodation and food services industry rebounded by 54.3 per cent over the third quarter. Yet, the sector remained 27.3 per cent below its February level in September.
- Real GDP in the construction industry fell by 1.2 per cent in September. Growth in residential construction (up 1.4 per cent) was heavily offset by declines in non-residential construction (down 9.5 per cent). Non-residential construction activity had fallen for three consecutive months as of September.
GDP, income, and expenditure in the third quarter
- Household consumption rose by 13.0 per cent in the third quarters compared to the previous quarter, driven especially by spending on goods (up 17.0 per cent). Patterns of consumption are reflective of life under a pandemic with rising expenditure on goods such as vehicles, household and garden appliances, alcohol and tobacco. Relative to pre-pandemic levels spending on services remains weak.
- Strong growth in residential construction continues to support investment which grew by 14.0 per cent in the third quarter.
- Unsurprisingly, given persistent economic uncertainty, other investment segments: machinery and equipment, intellectual property products and non-residential construction showed only modest growth. In addition, concerns over future demand mean that inventory investment remains depressed.
- As the global economy began to recover, international trade picked up, with exports rising by 14.5 per cent and imports rising by 21.9 per cent. Exports were boosted by a surge in sales of motor vehicles and parts in the U.S. Despite these encouraging signs, there is still a way to go for both imports and exports, neither of which have yet to reach pre-pandemic levels.
- Government expenditures grew by just over 3.2 per cent in the third quarter as a result of increased spending at the local, provincial and territorial levels. With the restart of the economy, tax revenues grew by 60.8 per cent in the third quarter though remain 22.7 per cent lower than those collected in the first quarter of 2020.
- As the economy reopened many Canadians transitioned off wage subsidies and back into work, resulting in some notable changes to the household accounts. Reflecting this shift, in the third quarter, government transfers in the form of employment insurance benefits to households fell by 46.7 per cent, while employee compensation grew by 7.9 per cent.
- Disposable income, which grew by 11.1 per cent during the second quarter has fallen by 3.1 per cent. After increasing more than five-fold in the second quarter of the year, largely as a result of government wage subsidy programs, household savings shrunk by roughly half in the third quarter of the year.