Canadian Economy Grew 0.8% in October, Preliminary Data Suggest Gain in November

The Canadian economy kept up its streak of monthly gains in October and appears to have done so again in November, which has left total economic activity within a statistical inch of where it was before COVID-19 hit. While the labour market has since rebounded from steep losses seen over March and April of 2020, the same can’t be said of economic output.

Statistics Canada reported that total economic activity in October was 0.4% below prepandemic levels recorded in February, 2020, with 0.8% gross domestic product growth for the month. Preliminary data pointed to another gain in November that Statscan said would leave the gap at just 0.1%.

Bank of Montreal chief economist Douglas Porter said getting GDP back to where it was in February, 2020, is only one economic bellwether, but wouldn’t necessarily mean a full recovery once accounting for where the economy should be with population growth. He warned that closing the gap could take a little longer because of an expected setback over December and January on the back of renewed public-health restrictions.  “It’s just one sign along the road to to recovery and … we’re likely going to have to repair more damage because of these latest restrictions in the coming year,” Mr. Porter said.

Heading into the Omicron storm, the Canadian economy posted its fifth straight monthly gain with October’s growth. The 0.8% showing matched the preliminary estimate released in November. Gains for October were seen across most sectors, including manufacturing whose rebound of 1.8% in October more than offset a September contraction. Driving that sector was output related to auto manufacturing, despite what the statistics office notes is a continuing shortage of semi-conductor chips among other supply chain issues hampering consistent production.

Also helping in October were gains in retail trade, and construction. Real estate activity followed in tandem, expanding 0.8%, the largest increase since December 2020.The arts and entertainment sector was also up in October, helped by larger capacity limits for audiences. Toronto-Dominion Bank economist Omar Abdelrahman said those very sectors will, once again, feel the brunt of tightened capacity limits among other renewed restrictions. He also said in a note that consumers could again focus their spending on goods and exacerbate supply chain issues.

Preliminary data point to a six straight month of gains in November as Statscan gave an early estimate of a rise in GDP of 0.3% for the month. Statscan will finalize November’s figures in early February.

Royal Bank of Canada economist Claire Fan said significant trade disruptions brought on by severe flooding in British Columbia could hold back growth in November, and the pandemic could add to the drag into December. She wrote in a note that high vaccination rates, extended government benefits and provinces speeding up the rollout of booster shots should all help curb the economic threat from this latest wave of COVID-19.

Canadian Imperial Bank of Commerce senior economist Andrew Grantham said even after accounting for the possibility of a pullback in December, GDP is still running modestly ahead of the Bank of Canada’s forecast of economic growth in the quarter at an annual rate of 4%. Mr. Grantham wrote in a note that the pace of economic growth likely won’t be enough for the central bank to change the timing for a first interest rate hike. The Bank of Canada has said it doesn’t foresee a first increase to its key policy rate from its rock-bottom level of 0.25% until at least April, 2022.

Statistics Canada reported on Dec. 23 that payroll employment grew by 131,700 positions, bringing the number of workers receiving pay or benefits from their employer within 0.6% of its pre-February 2020 level. Average weekly earnings stayed little changed from September to October, but year-over-year gains saw as much as %four per cent growth in B.C., 3.4% in Alberta and 2.7% in Ontario. With inflation raging, some markets are suspecting the Bank of Canada won’t be able to wait for a full labour recovery and might raise rates as early as January.

Source: Globe and Mail
Source: The Star
Source: Financial Post

Canadian Retail Sales Up in October but Economist Warns Omicron Pullback Likely on Horizon

Canadian retail sales were up 1.6% to $57.6-billion in October as new car sales rebounded after two consecutive months of declines. Statistics Canada said that the effect of the semi-conductor chip shortage on the supply of motor vehicles was less pronounced in October than in previous months. Sales at motor vehicle and parts dealers were up 2.2%, led by a 2.8 jump in new car sales, the agency said. Statistics Canada also said its preliminary estimate for November pointed to an increase in retail sales of 1.2% for the month, but it cautioned the figure would be revised.

“Canadian trade was moving into the fast lane in October and November, before Omicron likely applied the brakes in December,” Andrew Grantham, a senior economist with CIBC Capital Markets, said in a client note. The 1.6% increase in retail sales in October beat estimates of 1%, he said, adding that Statistics Canada’s early estimate for November suggests retail and wholesale sales saw further impressive gains last month.

“Were it not for the rise of Omicron and retightening of some restrictions across the country, we would probably be having to upgrade our Q4 GDP forecast even further,” Mr. Grantham said in the CIBC Economic Flash. “As it is, something around 4.5% may still be appropriate factoring in a modest December pullback.”

Meanwhile, overall core retail sales – which exclude gasoline stations and motor vehicle and parts dealers – increased 1.5%, the agency said. Sales climbed in seven of 11 subsectors in October, representing nearly 60% of retail trade.

One of the biggest increases was at sporting goods, hobby, book and music stores, which saw sales soar 17.5%. Statistics Canada said that the uptick in sales coincided with the continued resumption of many recreational and school-based sporting leagues in the fall.

Sales at general merchandise stores rose 2.8% for a fifth consecutive month. Building material and garden equipment and supplies dealers recorded a 3.2% increase in sales. Meanwhile, sales at food and beverage stores edged down 0.6%, primarily owing to weaker sales at supermarkets and other grocery stores.

Across Canada, retail sales were up in nine provinces in October, led by Ontario and Alberta. Quebec posted the lone provincial decline, with sales down 0.2 % in October. In volume terms, retail sales were up 0.9 per cent in October.

Growth in sales coincide with inflation matching a three-decade high this fall. The consumer price index rose 4.7% at the beginning of the fourth quarter, a figure not seen since 1991. Inflation is predominantly about energy prices and housing costs, but goods prices are rising too. Passenger vehicle inflation hit 6.1% in October, while parts, accessories and supplies rose 3.6% from the year-ago month.

Retail e-commerce in Canada

On a seasonally adjusted basis, retail e-commerce sales fell 0.9% in October. On an unadjusted basis, retail e-commerce sales were up 4.2% year over year to $3.3 billion in October, accounting for 5.5% of total retail trade. The share of e-commerce sales out of total retail sales increased 0.1% compared with October 2020.

Source: Globe and Mail
Source: The Star
Source: Financial Post
Source: Statistics Canada