Statistics Canada says the economy grew 0.3% in October, led by growth in manufacturing, finance and insurance, and wholesale trade.
Economists had expected growth of 0.2%, according to Thomson Reuters Eikon.
The improvement followed a contraction of 0.1% in September.
October’s return to growth was “something to put under the Christmas tree,” said CIBC chief economist Avery Shenfeld in emailed commentary. Year-over-year GDP in October is up at a “respectable” 2.2% pace, he said, which is above what the central bank sees as the economy’s non-inflationary potential of about 2%.
However, the weak handoff from August (+0.1%) and September means growth in the fourth quarter will likely be lower than the central bank projected in its October forecast (2.1%), said Shenfeld.
Monthly growth details
The finance and insurance sector grew 0.9% in October, after a 0.2% decline in September. Factors driving growth of financial investment services, funds and other investment vehicles were increased activity in bond and money markets and unseasonal stock market activity, said StatsCan.
Though the S&P/TSX Composite was down 6.5% on a month-to-month basis in October, the volume of transactions was the highest since March 2016, it said.
Insurance carriers and related activities were down 0.5%, declining for the fifth consecutive month.
Goods-producing industries increased 0.3% after two monthly declines, while services-producing industries also grew 0.3%, their strongest showing since May.
Retail sales and growth outlook
In a separate report, Statistics Canada reported retail sales increased 0.3% to $51 billion in October. Economists had expected an increase of 0.4%.
“Retail spending growth has slowed considerably alongside weaker housing and auto sales,” said BMO commentary.
Looking ahead to the new year, BMO says it expects the economy to be challenged amid oil production cuts and recent “confidence-sapping financial market turbulence.” Both BMO and CIBC call for GDP in 2019 to be 1.8%.
Referring to such challenges as sagging oil and commodity prices, the BMO report says that the risks to its call of 1.8% are “skewing lower as we speak.”