Canadian economy rebounds in third quarter, October GDP seen as strong

By Julie Gordon Nov 30, 2021

The Canadian economy roared back in the third quarter, as the easing of COVID-19 restrictions allowed for more household spending and exports, official data showed on Tuesday, with October's real GDP seen as strong on a manufacturing rebound.

Canada's economy grew 5.4% in the third quarter on an annualized basis, beating analyst expectations for a gain of 3.0%, Statistics Canada data showed. A preliminary estimate for October showed a gain of 0.8%, while September's GDP was in line with expectations for a 0.1% rise.

Statscan revised down annualized GDP in the second quarter to a contraction of 3.2% from a previous contraction of 1.1%. With the October gain, economic activity is now about 0.5% below pre-pandemic levels.

The data left economists cautious but optimistic.

"I don't want to read too much into the Q3 upside surprise just because there was that negative revision to the second quarter," said Andrew Kelvin, chief Canada strategist at TD Securities, adding: "It does shape up like we could be looking like a pretty decent fourth quarter."

The Bank of Canada last month signaled it could start hiking interest rates as soon as April 2022, with inflation set to stay above target through much of next year due to supply chain bottlenecks and high energy prices.

The Canadian dollar USDCAD steadied at about 1.2780 to the greenback, or 78.25 U.S. cents. Investors are pricing in a first rate hike in either March or April.

(Reporting by Julie Gordon in Ottawa, additional reporting by David Ljunggren and Fergal Smith in Toronto; Editing by Andrew Heavens and Paul Simao)

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