Canada's gross domestic product expanded at a 2.8 per cent annual pace in the past three months, Statistics Canada said today, much better than expected by economists.
An increase in exports and an uptick in household spending were the two main drivers of the increase, the data agency said Friday.
The 2.8 per cent figure is well ahead of the 2.1 per cent that economists had been expecting — but still not as good as the 3.9 per cent pace of growth posted by the U.S. earlier this week.
"Note that while this is a solid growth figure, this is still underperformance relative to the U.S," Scotiabank said after the numbers came out.
Exports increased by 1.7 per cent. In the previous quarter, they rose by 4.4 per cent. Canada shipped out 2.2. per cent more crude oil during the period, the data agency said.
Fridays numbers cover July, August and September — for the most part, the three-month period before oil prices began their precipitous decline. So it should be interesting to monitor if oil exports stay strong even after prices have cratered.
"The good news is that the economy was in a surprisingly very good place heading into the energy price storm," as BMO economist Doug Porter put it.
The Bank of Canada had been expecting growth to come in at about 2.3 per cent, which means the reality is better than expected. Normally, that would be a sign the bank would be leaning toward hiking rates to slow down inflation. But in this case, it's likely the bank will think the strong GDP growth will be offset by sinking oil prices, which are down by almost 40 per cent from where they were this summer.
The end result is the strong GDP doesn't mean it's any more likely the central bank will be in a hurry to hike rates, Porter said.
Another key Canadian industry, the auto sector, posted strong growth figures.
Canada exported 2.2 per cent more cars and trucks during the period, down from the 10 per cent gain in the previous quarter, but still a solid showing.
TD Bank senior economist Randall Bartlett said the falling oil prices "remain a dark cloud on the horizon" and noted that lower profits in the oil sector will weigh on production growth and capital spending.
But strength in all other parts of Canada's economy are maybe enough to offset that, he said.
"In any event, with momentum in other sectors, Canada's economy appears well-positioned to weather the storm," Bartlett said.