Quick take

The Canadian Consumer Powers Third Quarter GDP

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  • The economy grew by 0.1 per cent in September, a flat performance in line with Statistics Canada’s preliminary estimate. Third quarter real GDP increased by 1.3 per cent driven by household spending and exports.
  • StatCan’s preliminary estimates suggest 0.8 per cent GDP growth in October supported by broad gains across many industries.
  • Across the economy, among the services sector, declines in retail trade (-0.9 per cent) and accommodation and food services (-1.4 per cent) were offset by growth in the public sector (+0.7 per cent). On the goods side of the economy, GDP fell following declines in manufacturing, construction and agriculture and utilities.
  • On the income side of the economy, the household savings rate fell to 11.0 per cent, which, although elevated, represents its lowest level since the pandemic’s onset. On the expenditure side, spending on services increased by 6.3 per cent in the third quarter while increased spending on non-durable and semi-durable goods permitted a more modest 1.8 per cent increase in goods expenditures.

Key insights:

  1. As provinces lifted restrictions, Canadians headed outdoors and spent more. Throughout the pandemic, households amassed large amounts of savings thanks to government support measures. But now that the economy is opening up, Canadians are unleashing their savings, pushing economic growth higher. Since households are still holding on to a large amount of the support they received, the Canadian consumer will be an important player for Canada’s near-term growth prospects.
  2. Third quarter exports went up. But don’t let that fool you. Supply-chain disruptions are not going away any time soon. The global nature of supply chains means that producers often rely on imported parts to produce goods, many of which may later be exported. Persistent disruptions to the flow of goods worldwide will likely dampen Canadian exports in the months ahead. Supply problems are also fueling inflation which is eroding Canadians’ purchasing power.
  3. The rebound in the third quarter is a testament to fewer pandemic restrictions and the increased ability for Canadians to spend on services. Although the population and economy are more resilient today, recent developments indicate that the pandemic is far from over. We expect economic growth to continue in the final quarter. Still, until more epidemiological data is collected, the economic impact of the Omicron variant as we move into 2022 remains uncertain.

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Liam Daly

Liam Daly

Economist

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