- The Canadian economy ticked up in October, growing 0.4% m/m, slightly above Statistics Canada’s flash estimate of 0.2%. As a result, the level of GDP was 4.1% below where it was in February. Statistics Canada also provided an early glance at the economy’s progress in November, estimating another 0.4% pace for the month.
- Sixteen of the twenty industries saw output increase in October. Services-producing industries led the way, growing 0.5% m/m. Notably, professional services continued to post strong gains, rising 1% in October, up for the sixth consecutive month. The public sector was not that far behind, advancing 0.7% as health care and social assistance (+0.9%), educational services (+0.9%), and public admin (+0.4%) all saw increases. Meanwhile, accommodation and food services saw a steep decline of 3.9% as the patio season drew to a close, and new restrictions held back spending on indoor dining.
- In terms of goods-producing industries, gains were less stellar as GDP advanced 0.1% in October. The weakness was concentrated in the manufacturing sector which contracted 0.8% on the month. Durable manufacturing dropped 2.5% given significant contractions in transportation equipment (-3.7%), machinery (-4.1%), and fabricated metal product (-3.5%) manufacturing. Mining, quarrying, and oil and gas extraction also posted a weak showing, seeing no gains in October. Construction and utilities, on the other hand, grew 0.7% and 0.9%, respectively.
Key Implications
- The Canadian economic recovery continued to make headway in October, although growth slowed to its weakest pace since May. Early indications suggest there will be no improvement in growth in November.
- Rising caseloads and new restrictions are dampening economic activity, especially in those sectors hardest hit by the pandemic. Accommodation and food services saw a tremendous pull back in October, leaving output 31% below the February level. Arts, entertainment and recreation services continued to improve, but the string of gains since June could be nearing its end due to fresh lockdown measures.
- Indeed, the health and economic landscape have shifted significantly since October. The spread of the virus has become even more alarming and provinces are reacting with strong measures. Lockdowns in Alberta and Ontario point to an economic contraction in December, and possibly January. Only as health outcomes improve, can the economy find its legs. Let’s hope this happens sooner rather than later.
