Canadian Economy Grew at 1.3%


Real gross domestic product (GDP) increased 0.3% in the third quarter, after remaining essentially flat over the first half of the year. The Canadian economy grew at an annualized rate of 1.3% in the third quarter.

Most of the third quarter gain occurred in July. Economic activity edged up 0.1% in September following a decline in August.

Canadian producers increased their output in the third quarter. The production of goods rebounded in the third quarter following four consecutive quarterly declines. The increase was led by the mining sector, notably support activities for oil and gas extraction, as well as construction. The manufacturing sector edged up while forestry continued its decline. Production in the services industries continued to grow, with notable gains in the public sector and, to a lesser extent, in retail trade and wholesale trade.

Economic growth has been weak since the beginning of the year, as foreign demand has weakened and growth of domestic demand has slowed. Exports declined for the fifth consecutive quarter and growth of final domestic demand decelerated to 0.1%, largely as a result of a slowdown in consumer expenditure.

The instability of world financial markets did not appear to have a significant impact on funds borrowed in domestic financial markets in the third quarter. Funds borrowed by the domestic non-financial sectors on financial markets slowed. The fluctuation was similar to that which has typically been observed in the past.

The reduction in funds borrowed by the household sector was partially offset by increased borrowing by non-financial corporations in the third quarter, which accounted for just over one-third of all funds raised, driven by an increase in bank loans.

Growth in the volume of personal spending slowed to 0.2% in the third quarter. This was the third consecutive quarter of deceleration, and was the weakest growth since the fourth quarter of 2003. Slower growth was registered for spending on both goods and services.

Transportation expenditures were particularly weak, as purchases of motor vehicles fell 2.5%, on the heels of a 0.8% decrease in the second quarter. Demand for consumer credit was lower in the third quarter, influenced by declining motor vehicle purchases.

The slowdown in spending on consumer services reflects decreased spending on travel abroad, on restaurants and accommodation services and on purchased transportation.

Labour income advanced 0.8%, decelerating for a third consecutive quarter. Employment was down 0.1% in the quarter, while hours worked were virtually unchanged.

Overall, personal income grew 0.7%, a slight acceleration from the second quarter. Personal outlays outpaced income, and the saving rate slipped to 3.0%. Price increases, notably for food and fuel, contributed to a 1.2% increase in nominal personal purchases of consumer goods and services; even though the growth in volume of these purchases was much lower (+0.2%).


TradingEconomics.com, Statistics Canada
12/1/2008 6:02:00 AM