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Canada's third-quarter GDP comes in better than expected

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·2 min read
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Workers assemble bullet fairings for the Global 7500 aircraft at Bombardier Saint-Laurent Manufacturing Centre in Montreal, Quebec, Canada November 22, 2021. Picture taken November 22, 2021. REUTERS/Christinne Muschi
Exports helped drive economic growth in Canada (REUTERS/Christinne Muschi)

The Canadian economy fared better than expected in the third quarter, but it will take time for the effects of the Omicron variant to be clearer.

Statistics Canada says GDP rose 1.3 per cent during the period. The increase was driven by household spending and exports.

GDP rose 5.4 per cent at an annualized pace, better than the three per cent economists had expected.

Statistics Canada did however revise second-quarter GDP down to a 3.2 per cent decline, due to weakness in inventories and housing.

“While Q3 ended up roughly matching the Bank of Canada’s forecast, the downward revision to Q2 means that the two quarters together are still a bit disappointing relative to their call,” said CIBC senior economist Royce Mendes.

Statistics Canada says GDP rose 0.1 per cent in September as declines in manufacturing, construction and retail trade were more than offset by strength in services-producing industries as well as in mining, quarrying and oil and gas extraction.

A preliminary estimate points to rebound of 0.8 in October with strength in all sectors.

“The flash estimate for October, with GDP up 0.8% after a 0.1% gain in September, looks encouraging for Q4, but the attention in upcoming days will still be on how the omicron variant, should it prove to be vaccine resistant, might set back the timing of the next leg up for economic activity,” said Mendes.

Loonie and oil uncertainty

Cambridge Global Payments’ chief market strategist Karl Schamotta says when it comes to the Canadian dollar and oil, weeks of uncertainty beckon.

“The Canadian dollar is down roughly -3 percent for November, tracking an -18 percent decline in West Texas Intermediate crude prices over the month,” said Schamotta.

“With global travel restrictions increasing and policymakers contemplating new lockdowns, demand expectations have been crushed - and a postponement of planned OPEC+ production cuts may not be sufficient to turn the tide.”

Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains.

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