Canada’s economy inched ahead in the third quarter, meekly heralding an end to the recession and the start of what is predicted to be slow and laborious recovery.
Statistics Canada reported Monday that real gross domestic product, an inflation-adjusted measure of the economic growth, expanded at an annualized rate of 0.4 per cent in the third quarter. That was below the Bank of Canada’s two-per-cent growth prediction for the quarter, and economist’s expectations for an annualized growth rate of 0.6 per cent, according to CIBC World Markets.
The first overall economic growth in a year marks an end to the recession, which is technically defined as at least two back-to-back quarters of contraction.
By comparison, the American economy registered growth of 2.8 per cent during the same period, Statistics Canada said, though the U.S. has been pulling itself out of a deeper recession.
“We’ve certainly been slowest out of the gate to economic recovery relative to most of the other major economies,” said Avery Shenfeld, chief economist at CIBC World Markets.
“The only plus side here, is that the third quarter ended on a strong note with a healthy GDP gain in September, and that does give us hope that we’ll see much better growth for the fourth quarter.”
Real GDP — economic growth adjusted for inflation — was up 0.4 per cent in September, the final month of the quarter, as most major industrial sectors increased their production.
Economists have latched onto that optimism as a way to build hope for a stronger recovery into next year, driven by an uptick that is expected to register in the final three months of 2009.
TD Securities Economics strategist Millan Mulraine suggested the fourth quarter could launch a “significant pickup” of about three per cent.
“Looking ahead, we think that the Canadian economy will at least outperform the U.S. economy in the near term,” he said.
“One of the things to look at next year is what happens to consumer spending. We think that additional upside could come from net trade if the pickup in the U.S. starts gathering steam.”
There was further optimism in a November survey conducted by the Canadian Manufacturers & Exporters, which showed strength in both orders and a hopeful outlook on future employment.
The survey found that 63 per cent of respondents said manufacturing orders were either the same or higher in value compared to August. On the jobs front, 79 per cent of respondents said they planned to either hold employment steady or hire new workers over the next three months, showing that some within the industry expect further momentum in their growth.
Statistics Canada said in the third quarter final domestic demand advanced 1.2 per cent, as capital investment and personal spending both increased.
Consumer spending on goods and services, one of the pillars of Canadian economic health, was up 0.8 per cent, the biggest increase since the fourth quarter of 2007 as households increased spending on durable goods 2.4 per cent, particularly on new and used motor vehicles and on furniture.
The domestic economy is looking to shake off the months of battering it suffered during a global economic meltdown that saw the failure of U.S. banks, ravaged corporate profits and hundreds of thousands of jobs lost.
Bank of Montreal deputy economist Doug Porter said the data indicates that Canada’s economy is on the mend, but the third-quarter numbers were “not exactly a clanging endorsement of the ’end of recession’ story.”
“While the quarterly gain for the third quarter was a bit of a damp squib, this doesn’t alter the bigger picture that the Canadian economy is erratically grinding out of recession, led by broad-based gains in domestic spending,” Porter wrote in a note to clients.
“With the solid hand-off from the sturdy September result and mounting signs that the U.S. recovery is taking root, look for much more convincing evidence that the recession is over in fourth-quarter GDP results. Still, the broader picture of a relatively muted recovery remains the dominant theme.”
Among its other findings, Statistics Canada said export and import volumes both increased after many quarters of decline, suggesting that industrial activity is picking up.
The output of services-producing industries increased 0.6 per cent, with the wholesale and retail trade sectors and real-estate agents and brokers leading the way.
Goods-producing industries slipped 1.4 per cent, continuing a downward trend that started in the third quarter of 2007. Mining and oil-and-gas extraction contributed the most to the decrease as a result of temporary shutdowns.