The economy is growing faster than expected thanks in part to some bigger housing markets that continue to boom as well as other contributions from consumers, many of whom are snapping up vehicles at a record rate.
Exports are also on the rise, Statistics Canada said Friday — a key development.
The federal agency says the economy grew at an annual pace of 2.8 per cent in the three months up to the end of September.
Experts had been anticipating a slight slowdown in economic output (to about 2.2 per cent) after a strong reading through the late spring and early summer (or the second quarter) as the economy bounced back from a frigid winter last year.
“Some downshifting is expected,” Bank of Montreal senior economist Sal Guatieri said before the release. There was no downshift.
Consumers still spending
Household consumption on everyday goods and services rose during the three-month stretch, Statscan said, led by stronger-than-expected retail spending and robust car-buying activity. Vehicle sales were up 4.6 per cent year over year.
MORE: Consumers tap longer car loans as auto spending spree continues
A lower loonie helped keep Canadians spending at home versus abroad, with expenditures outside of Canada falling a touch during the three month stretch.
Even as consumers grapple with near-record debt burdens, “household spending continues to increase,” Statscan said.
Exports up
Still, an equal contributor to growth was exports – a key development given that many experts suggest households are set to slow down spending habits in the near- to medium-term. Powered by a lower loonie, exports are being relied on to sustain the economy over the next while, experts say.
A rebounding U.S. economy should help. With about three quarters of Canadian exports bound for the world’s largest economy, rising U.S. demand is expected to bring Canada’s economy along with it.
Some evidence is already emerging that’s occurring. Canada has experienced a mini-jobs boom through September and October, notably among manufacturers and others firms who export their goods.
“Like the U.S., Canada’s economy has shifted to a firmer track this year,” BMO’s Guatieri said.
A dark cloud
One dark cloud however is fast-falling oil prices. Crude’s sharp retreat in recent weeks will likely stimulate more consumer spending as shoppers divert gas money to other things.
But as a net exporter of oil, Canada is likely to suffer the longer oil prices remain down. “The new threat to the economic growth outlook is the slump in oil prices,” David Madani at Capital Economics said.
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