Factories, oil boost best economic growth in five months

Canadian gross domestic product grew at the fastest pace in five months on a lift from manufacturing, while oil made an unexpected contribution as prices began to fall for Alberta crude.

Output grew 0.3 per cent in October, Statistics Canada said Friday, faster than the median forecast in a Bloomberg economist survey of 0.2 per cent.

Factory production expanded 0.7 per cent to make up most of the losses over the prior two months, while wholesaling climbed 1 per cent. The highest volume of trading since March 2016 on the Toronto Stock Exchange also boosted the finance and insurance industry by 0.9 per cent.

The GDP report is the last one Bank of Canada policy-makers will see before they set interest rates and update their quarterly forecasts on Jan. 9.

Governor Stephen Poloz has said how soon he adds to his five rate increases since mid-2017 will depend on fresh data, and that he needs to assess the drag from a drop in Alberta oil prices.

There wasn’t much direct evidence of an energy slump in the October GDP figures. Oil and gas extraction climbed 3.6 per cent as producers returned sites to service after maintenance shutdowns. The Alberta government has ordered production cuts in January that could slow growth from here.

TD Bank senior economist Brian DePratto said the economy recorded a solid expansion for the month.

“The breadth of the expansion was particularly encouraging, even as construction activity remained a weak point for a fifth straight month,” DePratto wrote in a note to clients.

He said the breadth of growth will come into play in the months and quarters ahead.

“November saw the worst of the discounts on Canadian oil blends, and voluntary production curtailments are likely to weigh on activity,” DePratto wrote.