Canadian authorities revealed that the country's Gross Domestic Product (GDP) experienced a contraction of 1.1 percent at an annualized rate in the third quarter. This downturn was predominantly attributed to a significant decline in exports, particularly in refined petroleum energy products, which witnessed a substantial 25.4 percent drop, according to Statistics Canada.
The federal agency indicated that overall exports of goods and services experienced a decline of 1.3 percent during the third quarter, following a minor uptick in the preceding quarter. Conversely, imports of goods and services saw a more modest decrease of 0.2 percent, driven by declines in clothing, footwear, textile products, transportation services, and electronic and electrical equipment and parts.
In a noteworthy revision, Statistics Canada revised second-quarter data, revealing a growth of 1.4 percent during the period, contrary to the initially reported drop of 0.2 percent in September. This revision steered the Canadian economy away from the brink of a technical recession, defined by consecutive quarters of negative growth.
Desjardins analyst Royce Mendes remarked on the unexpected revisions, stating, "Statisticians threw markets a curveball today." Nevertheless, he expressed that the economy appears to be aligning with earlier projections by the end of the third quarter. Mendes also noted early indications suggesting a potential rebound at the beginning of the fourth quarter, supported by preliminary data showing a minor uptick in October.
RBC assistant chief economist Nathan Janzen echoed the sentiment that, despite avoiding a recession, the macroeconomic landscape for Canada continues to exhibit signs of softness. Both analysts anticipate the Bank of Canada maintaining its key lending rate in the short term. Janzen even suggested a potential "pivot to rate cuts" in the coming year.
Amid economic uncertainties, Statistics Canada reported stable Canadian spending in the third quarter, accompanied by a 1.3 percent increase in employee compensation. However, non-residential construction business investments witnessed a 2.0 percent decline during the same period.
Inflation in Canada stood at 3.1 percent in the previous month compared to the corresponding period a year earlier, primarily influenced by decreasing gasoline prices. The country's central bank opted to maintain its key rate at five percent at the conclusion of October, following a series of aggressive rate hikes over the past eighteen months, aimed at reining in inflation within the target range of 1 to 3 percent.
