Statscan just released its latest monthly snapshot on the Canadian economy and the picture that’s developed contains some mixed signals. Here’s five things to know about the latest GDP print and what it means for consumers and households:
The economy grew by 0.3 per cent in November, in line with estimates. But those estimates were kind of bleak to start with. November’s gain was preceded by back-to-back months of zero growth (and in the case of September, and outright plunge).
The weak “hand off” means the economy will be lucky to post any growth at all through the final few months of the year — meaning the economy quite possibly shrank through three of the past four quarters. Not good.
Economists suggest several indicators are pointing toward a retreat in growth in December.
“The best we can still hope for is that fourth-quarter growth won’t be negative,” CIBC economist Nick Exarhos said.
Despite the headwinds battering growth, consumers continue to do their part.The service sector churned out modest growth of 1.4 per cent in the latest print, led by retail and real estate, i.e. “the consumer.”
Black Friday likely played a role though – and will result in a drag on retail sales in December, Exarhos suggested. “The pulling forward of the holiday shopping season into November’s Black Friday chews into sales usually made the following month,” he said.
Exports were up in the month, breaking a pattern of weaker readings, but much of it was tied to oil and gas. Non-energy manufacturing still isn’t benefiting much from the sharp drop in the loonie, which on paper should be fueling a rebounding export sector. Yet manufacturing output is actually down 1.1 per cent year over year.
Some, like economist David Madani at Capital Economics in Toronto, aren’t convinced the lower currency will lead to a meaningful export revival.
“This reflects the lack of competitiveness among exporters,” he said of the disappointing trend. “While the Canadian dollar has fallen sharply against the US greenback over the past year or so, the same is true for the currencies of Canada’s competitors, particularly Mexico.”
Much of the November rise was aided by a rise in oil production. Oil sands firm Syncrude ramped up production after a shutdown in September.
Oil is also starting to flow from projects coming online now, HSBC Canada economist David Watt said. “Many projects that have been under construction for the past few years, are just now coming to the production phase,” he said. “Even with oil prices far lower than they were when the projects were given the go-ahead, production is starting.”
Unfortunately, the economy’s so-so performance in November could be as good as it gets for some time, experts say.
“There are reasons to believe that the pick-up in activity observed in November did not carry over into December,” Watt said.
BMO chief economist Doug Porter said the first quarter (January through March) “faces a tough uphill battle amid the deep sag in oil and other commodity prices, as well as the stumbling start to the year for financial markets” – tumult that rattled confidence among consumers and businesses, he said.
Like others, BMO recently cut its growth estimates for the economy to a meagre 1.0 per cent this year.
“The economy should see anemic growth through the beginning of 2016, with better figures reserved for later in the year as the fiscal stimulus promised by Ottawa has an impact.”