For those looking for good news about Canada’s economy, the recent GDP figures for the third quarter showing a 2.3 per cent annualized growth are a sign of hope, but analysts have been quick to quash that hope warning that the performance is not likely to be repeated in the near future.
“There is good reason to believe that the relatively strong growth of the third quarter will not be repeated,” notes TD Economics economist in a December 1 commentary about the GDP figures. “Momentum appears weaker heading into the fourth quarter (even abstracting from the noise in the oil and gas sector), with growth currently tracking close to 0.8 per cent. Looking into 2016 and beyond, we continue to expect moderate growth of around 2 per cent per year. A continued shifting of Canadian growth drivers is anticipated, with exports taking a more leading role as the housing market takes a breather and investment continues to face the dual headwinds of low oil prices and a weak loonie.”
Scotiabank economists Derek Holt, Frances Donald and Dov Zigler note that growth over the month of September was dragged down by a 5.1 per cent contraction in energy extraction contracts, a 0.6 per cent drop in manufacturing output and a 0.3 per cent drop in wholesale trade and “because we ended Q3 on a weaker note…the handoff to Q4 is poor. Without any Q4 data of significance yet, we’re tracking a contraction of 1.1 per cent in Q4.”
However, the economists question whether it’s fair to gauge tracking risk this way.
“Not entirely is the short answer because the distortions that dragged down minining/oil/gas sector output in September were one-off adjustments due to fires and shut production.”