Fortunately, underlying strength in housing and employment will likely propel near-future acceleration
Canadian purchasing power has suffered a major hit, amid the national economy significantly decelerating during the third quarter.
Figures from Statistics Canada released late last week showed that the annualized pace GDP growth over Q3 2019 was 1.3%, which was markedly lower than the 3.5% measure during the quarter prior.
Domestic demand proved not enough to offset declines in business inventories, which imparted a strong downward pull on the economy, StatsCan data indicated.
Exports also fell by an annualized pace of 1.5%, representing the third drop in the past four quarters.
More robust fundamentals can potentially boost the economy’s prospects further down the line, however. Stronger employment and a more active national housing market are likely to play central roles in such a resurgence.
Despite the moderating impact of global trade turmoil, Canadian residential investment grew at its fastest rate since 2012, with an annualized pace of 13.3% during Q3 2019. Non-residential business investment also more than compensated for second-quarter losses, with spending on non-residential structures and machinery up by 9.5%.
These developments impelled a 3.2% rise in overall domestic demand, “fully rebounding from a very weak second quarter when consumption slowed and investment contracted,” according to a Bloomberg analysis.
Also, the trend will “for now reinforce the Bank of Canada’s view that they have rates low enough to offset the drag from weak external markets,” CIBC chief economist Avery Shenfeld wrote to investors.
“Overall, a mixed bag, but perhaps a bit better than it looks in the headline given the strength in domestic demand.”
