November 2023 GDP: A surprisingly strong temporary rebound

The Canadian economy bounced back in November, but let’s not get too excited.

After three consecutive months of no growth – during which sectors like manufacturing and transportation faced headwinds – some sectors have started to grow again due to rebounds in activity following maintenance shutdowns and the resolution of the St. Lawrence Seaway labour strike. With this monthly surprise and a strong December flash estimate, the Canadian economy is likely to grow 1.2% annualized in the fourth quarter, ending the year with 1.5% growth in 2023. This is well above the Bank of Canada’s recent forecast of essentially no growth in the fourth quarter. The resilience of the Canadian economy and persistence of consumer spending will continue into December based on the Chamber’s spending tracker data. This makes us confident that we’ll end the year on a positive note.
Andrew DiCapua, Senior Economist, Business Data Lab, Canadian Chamber of Commerce

KEY TAKEAWAYS

Headlines

Canada’s real gross domestic product (GDP) grew 0.2% in November. This was stronger than markets expected (+0.1% and advanced flash estimate from StatCan).
This represents a rebound in activity, following three months of a stalling economy. Although positive, this should not be conflated with an economy set to grow.
Output grew in 13 of 20 sectors, led by gains in goods, which were up 0.6% on the month, while services grew a merely 0.1%.

Movers and Shakers

The manufacturing sector accelerated on the month, increasing by 0.9% in November. This was led by a chemical manufacturing rebound following facility maintenance. Non-durable goods manufacturing, particularly textiles and paper led the gains.
Wholesale trade rebounded 0.7%, following declines last month of similar magnitude, with personal household goods and motor vehicles accelerating on the month.
Transportation and warehousing increased 0.8% in November, rebounding from the impacts of the St. Lawrence Seaway strike. Both rail and truck transportation helped boost November data.
The mining, quarrying, and oil and gas extraction sector grew by 0.3% in November. Oil and gas extraction led the increase as a result of strong oil sands extraction growth (+3.8%) following maintenance competition of synthetic oil upgrading facilities.

OUTLOOK AND IMPLICATIONS

StatCan’s flash estimate for December is for growth of +0.3%. Taking this into account, 2023 is on pace to grow by +1.2% q/q annualized.
Given the fourth quarter is expected to be much stronger than Bank of Canada’s Monetary Policy Report forecast of 0% for 2023 Q4, all eyes will be on Q1 2024 growth, where the Bank is expecting 0.5% growth.