Canadian economy set for modest Q3 rebound as trade pressures ease

Next Friday’s Q3 gross domestic product release is likely to be backloaded, with an anticipated 0.3 per cent bounce-back in September after a surprise 0.3 per cent contraction in August. That would be firmer than Statistics Canada’s 0.1 per cent preliminary estimate and is seen as consistent with further acceleration in growth in Q4, according to the Royal Bank of Canada.

Heavily trade-exposed industries continued to broadly underperform in Q3 but have shown further signs of stabilisation. Manufacturing and wholesale sales volumes are estimated to have rebounded by an annualised 6 ½ per cent in Q3, partially reversing large declines of 11.7 per cent and 9 per cent, respectively, in Q2.

Offsetting weakness in trade-exposed sectors, domestic Canadian demand has remained relatively resilient so far. Business investment likely contracted in Q3, but tracking of RBC card transactions points to further, albeit slower, growth in consumer spending after a large increase in Q2.

Net international trade data through August is on pace to add slightly to growth in Q3 after a record subtraction from Q2 GDP (outside the 2020 pandemic lockdowns), when exports plunged on lower shipments to the United States.

ALCHEMPro News Desk (MS)