Canadian economic growth jumped 0.3% month-on-month (m/m) in October, ahead of Statistics Canada’s advanced guidance and consensus expectations. Early estimates from Statistics Canada point to a slight pullback in November GDP (-0.1% m/m).
October’s reading was broad-based, with output expanding in 12 of 20 industries. The goods sector grew by a hefty 0.8% m/m, while the services sector added a modest assist of 0.1% m/m to October’s GDP growth.
On a weighted basis, the mining/oil & gas sector posted the biggest tailwind for October activity, gaining 2.4% m/m, with oil & gas extraction (+3.1% m/m) accounted for most of the gain. Elsewhere, the manufacturing sector advanced for a second consecutive month (0.3% m/m), while construction grew by 0.4% m/m.
On the services side, the real estate sector saw its biggest monthly gain so far in 2024, up by 0.5% m/m on the back of a rise in national home sales. Wholesale trade (0.5% m/m) and the transportation sector (0.2% m/m) also recorded gains despite coinciding with the Canada Post strike.
The advanced reading of a slight pullback in growth in November is due in part to a moderation in the oil and gas sector as well as finance and insurance.
Key Implications
Solid October GDP growth combined with upward revisions to the month prior put Canada’s economic activity on decent footing to end the year. Early tracking for fourth-quarter GDP suggests trend-like growth (~1.7%), an uptick relative to Q3’s more meager gain of just 1%.
The Bank of Canada has cut interest rates by 100 basis points (bps) over their last two meetings. Today’s data should assuage fears of excessive downside to Canadian growth in the near-term, which should see the Bank move back to a more measured 25 bps cut at their next policy meeting in January. Looking ahead, more cuts are on the way, with the focus now shifting back to upcoming labour market updates.
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