Canadian economy turns around to grow 3.5% in 3rd quarter
Energy sector recovers from Fort McMurray wildfires, tourism picks up with cheap loonie
The Canadian economy turned around in the third quarter of the year, growing at 3.5 per cent annually after a rebound in energy exports as the sector recovered from the Fort McMurray wildfires.
Statistics Canada reports GDP grew by 0.9 per cent in the three months to Sept. 30, following a 0.3 per cent downturn in the second quarter of the year.
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The key change was a 6.1 per cent increase in exports of energy products, as the sector recovered from the Fort McMurray wildfires that had suspended production. Maintenance shutdowns in the oilpatch during the second quarter had also depressed energy exports.
Exports of goods and services rose 2.2 per cent in the third quarter, with makers of consumer goods taking advantage of a low Canadian dollar to boost their overseas sales by 3.6 per cent.
Cheap loonie means more tourism
The cheap loonie also drew more travellers to Canada and the tourism sector earned three per cent more.
The Canadian consumer remained cautiously optimistic, with household spending expanding by 0.6 per cent, about the same rate as in the previous quarter.
People spent more on transportation, recreation and eating out in the long, warm summer, but a little less on durable goods like vehicles.
TD Bank economist Brian Pratto warned that the economy's strong third-quarter performance is a blip and won't last.
"When it comes to economies, what goes down usually comes back up, and Canada is no exception. The resumption of activity following the May wildfires in Alberta delivered the fastest pace of economic growth since the end of 2014," he said in a note to clients.
"Canada has regained back the ground lost in the second quarter, and then some. Beneath the surface however, lies an economy that continues to struggle to find new sources of growth."
September's growth rate was a stronger-than-expected 0.3 per cent.
But Pratto said momentum heading into the end of the year appears soft, as GDP excluding energy gained just 0.1 per cent in September.
Business investment is one off-note, down 3.2 per cent in the third quarter, with less spending on intellectual property and on mergers and acquisitions.
The Bank of Canada expects the economy grow at an overall rate of 1.1 per cent in 2016, followed by two per cent in 2017.