The Canadian economy grew in both August and September, with the August gain slightly above expectations, but a rise in COVID-19 infections, along with targeted restrictions to curb the virus, are expected to put a lid on economic activity into the fall.
Canada’s real GDP rose 1.2 per cent in August, ahead of analyst estimates of a 0.9 per cent gain. StatsCan said its preliminary estimate for September was a gain of 0.7 per cent and a real GDP gain of 10 per cent in Q3. That would translate to a 46 per cent annualized gain for the quarter, analysts said.
“The good news is that Canada’s economy continued to heal in both August and September,” said Royce Mendes, senior economist at CIBC Capital Markets, in a note, although he added that the preliminary estimate for September was underwhelming.
“It appears that the economy was slowing more than expected heading into the fourth quarter,” Mendes said.
Even with the gain in August, economic activity remains about five per cent below its pre-pandemic level, StatsCan said.
Clawing the rest of the way back will prove difficult, with Canada now averaging 2,747 new COVID-19 cases per day, prompting renewed restrictions in hard-hit regions. Targeted closure began in late September.
“The way forward has been deeply clouded by the second wave and renewed restrictions, so growth will cool considerably in Q4,” said Doug Porter, chief economist at BMO Capital Markets.
Still, Porter said fiscal supports and the more targeted approach this time around would likely mean the late-year setback would be “relatively mild.”
The August GDP gains were driven by the public sector, which grew 1.9 per cent. The manufacturing sector was up 1.2 per cent, though the pace of growth was far slower than in the previous three months.
The Canadian dollar was trading 0.2 per cent higher at 1.33 to the greenback, or 75.19 U.S. cents, clawing back some of its weekly decline.