The Canadian (GDP) increased by 2.9% in the third quarter, mainly exceeding analysts’ expectations, the Canadian Statistical Institute said on Tuesday, 29 November.
This is the fifth successive increase in GDP and is mainly due to the growth of crude oil and bitumen exports (+2.1%) and a high accumulation of inventories for a second consecutive quarter.
The Canadian Department of Statistics also revised the growth rate of the Canadian economy slightly downwards for the second quarter, from 3.3% to 3.2%.
Total inventories rose in all manufacturing, wholesale and retail sectors to “a record level of additions to inventories,” Statistics Canada said.
However, Canadian consumers invested less in housing for the second consecutive quarter, reducing spending on renovations and resale activity.
The increase in GDP was also tempered by a reduction in household spending, leading to a rise in disposable income.
In the world of work, Canadian employee compensation continued to rise in the third quarter but at a slower pace, the slowest since mid-2020, the government agency said.
“The solid growth in the third quarter doesn’t reflect the underlying strength of the Canadian economy,” tempered Royce Mendes, a financial analyst at Desjardins Bank, noting that “much of the increase comes from external demand and volatile categories.
“There are early signs that inflationary pressures have begun to ease, and … a slowdown in domestic demand, which means the Bank of Canada may soon be coming to the end of its current interest rate hike cycle,” said Nathan Janzen, deputy chief economist at RBC Economics.
Experts agree that the Canadian central bank should only raise its key rate by 0.25 percentage points next week.
At the end of October, it raised its key rate for the sixth consecutive time, from 0.25 percent in January to 3.75 percent, to slow inflation.
The inflation rate remained stable in October at 6.9%, after a record high of 8.1% in June.
Estimated at 3.9% for 2022, GDP growth is expected to fall to 0.7% in 2023, the government said in its latest budget update, admitting that the prospect of a recession was approaching against a background of record inflation.