OTTAWA –
The Canadian economy appears to have rebounded in the third quarter after stumbling and contracting in the previous three months.
Statistics Canada’s initial estimate suggests the economy grew at an annual rate of 1.9% in the third quarter, the agency said on Friday.
The result may change once the agency receives additional data. The figure will be finalized next month.
While the result would be a welcome turnaround from the 1.1% contraction between April and June, the size of the rebound looks disappointing, BMO chief economist Douglas Porter said.
“The fact that the economy only managed to grow at an annual rate of around 2% after falling in the second quarter shows how struggling it is to grow,” Porter said.
“We had a very good start to the year, but the economy, frankly, struggled to build on that momentum.”
It won’t be any easier as economic headwinds over global supply chain problems are expected to worsen, facing what Porter has described as another in a series of unfortunate events preventing the economy from growing. ‘reach its full potential.
After contracting in July, real gross domestic product rose 0.4% in August, driven by increased activity in high-contact service sectors aided by the easing of public health restrictions.
Production in restaurants and bars increased 5.4%, accommodation services increased 11.3% and air transport increased 24.2% to mark six consecutive months of double-digit growth as more travelers have taken off.
The agricultural sector was a source of weakness, with agricultural production falling 10.9 percent due to record heat and drought in the West.
Statistics Canada said the second consecutive month of decline in the sector marked the largest consecutive monthly contractions since the agency began collecting comparable data in 1997.
To close the quarter, the agency estimated GDP was largely unchanged for September, with a significant drop in manufacturing and declining retail trade offsetting gains elsewhere.
Statistics Canada said total economic activity in August was about 1% lower than pre-pandemic levels recorded in February 2020, a gap that did not change in September.
TD Bank Senior Economist Sri Thanabalasingam said closing the remaining gap could be difficult as global supply chain disruptions and labor shortages could dampen production for months to come. to come.
The Bank of Canada, he writes, “may once again have to adjust its discourse on the Canadian economy.”
On Wednesday, the bank downgraded its growth forecast for the third quarter to 5.5% from an annualized rate of 7.3% in its previous forecast, and lowered its growth forecast for 2021 to 5.1% against 6%.
Even though growth has fallen below expectations, Porter said the central bank is still considering raising rates sooner than expected because inflation is above its comfort zone.
Governor Tiff Macklem has warned that high inflation rates are expected to increase as supply chain problems worsen in the coming weeks. He added that the bottlenecks would eventually have to be resolved.
CIBC chief economist Avery Shenfeld said on Friday that the impact of bottlenecks is expected to ease in 2022 if the source of the problems, often COVID-19 outbreaks overseas, heals.
Finance Minister Chrystia Freeland was in Rome to meet with her G20 counterparts on Friday where she planned to push countries to better share vaccines, which could reduce global epidemics weighing on trade.
Freeland previously said the government was monitoring Canadian ports for signs of strain, but opposition conservatives on Friday called on the government to do more to unclog supply chains and help grow the economy national.
“As global economies continue to emerge from the COVID-19 pandemic, it has never been more essential to have a plan to address the significant economic challenges on the horizon,” said Conservative Leader Erin O ‘ Toole in a press release.
O’Toole, in a letter to Trudeau last week, called on the government to work with the private sector and the White House to strengthen the North American supply chain in light of global challenges.
This report by The Canadian Press was first published on October 29, 2021.
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