Canada’s economy shrank by 0.3% in third quarter, StatsCan says

Canada’s economy shrank in the three months up to September, as household spending was flat and exports declined.

Statistics Canada reported Thursday that the country’s gross domestic product shrank by 0.3 per cent. 

Exports fell by 1.3 per cent and imports declined by 0.2 per cent.

Household spending was flat for the second quarter in a row, and after five consecutive quarterly declines, housing investment increased by two per cent in the quarter.

The data agency previously reported that the three-month period up to June also saw a slight decline, so Thursday’s numbers would have been the second consecutive quarterly contraction in a row, and meet the bar that some experts say is the requirement for a recession.

But the data agency revised its April-to-June numbers higher than initially reported, and now says the economy grew by 0.3 per cent that quarter.

Doug Porter, an economist with Bank of Montreal, said that the upward revision of the April-to-June numbers makes recessionary talk premature, but regardless, the numbers paint a picture of an economy that isn’t really expanding.

“Whatever label you slap on this economy, it’s basically not growing, despite the artificial sweetener of rapid population growth,” he said. “The big picture is that the Canadian economy is struggling to grow, yet managing to just keep its head above recession waters.”

The weak GDP numbers make it a virtual certainty that the Bank of Canada will see no need to raise interest rates any time soon, starting with its next policy decision next week.

Derek Holt, an economist with Scotiabank, says the numbers aren’t as bleak as the headline contraction would suggest, and much of the weakness stems from short-term factors.

“Half the country was literally on fire over the summer and those wildfires disrupted a broad cross-section of economic activity from shut mines and petrochemical facilities to agriculture, forestry and tourism under the warm glow of orange skies,” he said.

Ultimately, he doesn’t see any evidence that a recession is underway.

“The economy is not in recession as some folks across [Bay] Street have been claiming,” he said. “The recessionistas have some explaining to do and the Bank of Canada won’t see enough in here to guide easing any time soon.”

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