Widespread growth—including in financial services—boosts GDP

Real gross domestic product (GDP) increased 0.4% in November, says StatsCan, with growth reported in 17 of 20 industrial sectors.

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The finance and insurance sector grew 0.3% in November, after four consecutive months of decline. Financial investment services, funds and other financial vehicles were up 0.5%, says StatsCan, as market activities involving securities, mutual funds and trusteed pension assets increased.

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In a GDP report, Nick Exarhos, director at CIBC World Markets, notes the monthly GDP gain of 0.4% was the strongest in six months.

“Still, today’s results only keep us in the 2% or so range for Q4, slightly under the [Bank of Canada]’s recently released, and unchanged, 2.5% forecast,” he says. “That suggests a pause through the winter and spring is still the most likely outcome for rates.”

Derek Holt, vice-president and head of capital markets economics at Scotiabank, has a different take on potential BoC action.

“Strong growth in November, combined with last week’s further increase in core CPI, present[s] evidence to somewhat hawkishly inform the BoC’s data-dependent posture in support of our forecast for another rate hike by spring,” he says in a report.

Read: CPI data point to ‘hotter price growth’ for Canada: economist

However, Holt acknowledges “we’ll still need a rather strong December reading or difference in GDP tracking sources” to reach the BoC’s growth forecast of 2.5%.

The nitty-gritty

Goods-producing industries rose 0.8% after declining 0.5% in October, says StatsCan. The gain in November was largely due to increases in the manufacturing and mining, and quarrying and oil and gas extraction sectors as production returned to capacity.

The manufacturing sector was up 1.8% in November, the largest monthly increase since February 2014, says StatsCan, as the majority of subsectors grew.

Says Exarhos: “Most of the strength in manufacturing was tied to autos, which after four straight months of declines totalling over 20%, closed most of the gap by expanding at a 14.3% clip.”

On the oil and gas sector, he comments, “We’re looking for more growth in the sector in the year ahead, as firmer pricing for light crude incentivizes conventional production, while a major oil sands facility gears up for what is likely to be 200k [barrels per day] of output sometime in 2018.”

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Services-producing industries rose 0.3%, led by the real estate and rental and leasing, wholesale, and retail trade sectors.

In particular, real estate and rental and leasing rose 0.4% in November. Although there was increased home resale activity in Ontario and Alberta, the level of activity of this subsector remains below its March 2017 level, says StatsCan, following provincial government changes to housing regulations in Ontario that came into effect in April 2017.

For more details, read the full StatsCan report, and the reports from CIBC and Scotiabank.