Economists look for signs of strength
OTTAWA — Given that we are in post-recession mode, sort of, any positive signs for Canada’s economy should be welcome. And this week should present some reasons for optimism, if forecasters have got it right.
Overall, economic growth appears to have regained traction — slow but steady, and still tentative. Employment is, at least for now, on a mild upward trajectory, while interest rates look like they will remain at current near-record lows well into next year.
But, this being Canada, much is out of the country’s control — oil prices being the most critical at this point. Then there’s the long-hoped-for spinoff effect from a strengthening U.S. economy, which has been countered by concern over cooling output in China. So far, Canadian consumers — the bedrock of the economy since the 2008-09 recession — have kept on spending, even through a renewed downturn in the first half of 2015.
Today, Statistics Canada will tell Canadians where they stand on the economy.
Following two consecutive quarterly declines in gross domestic product at the start of 2015 — contracting by 0.8 per cent and 0.5 per cent — the third-quarter report is likely to show annualized growth of two per cent, or slightly more.
“After stumbling in the first half of the year, it appears that the economy rebounded in the third quarter,” David Madani, Canadian economist at Capital Economics, wrote in a note to clients.
“Just as temporary oilsands shutdowns in the spring made the decline in second-quarter GDP look worse than it actually was, the resumption of nonconventional oil production will also make the recovery look a lot stronger than is actually is,” Madani wrote.
“Rather than the slump in oil prices, those disruptions were caused by longer-than-normal maintenance and the threat from wildfires.”
Still, the impact from last year’s collapse of global crude — currently trading below $42 US a barrel, after losing nearly half its value — will linger for a while longer.
“It’s just kind of steady as she goes for the Canadian economy — not doing great, not doing too poorly,” said Benjamin Reitzes, senior economist at BMO Capital Markets.
“We’re waiting for things to improve a little bit more, waiting for the negative impact of oil prices to fade — we might be waiting at least another quarter or two, though.”
Tuesday’s GDP data should show consumer spending was “decent” in the third quarter, Reitzes said.
“It’ s just kind of steady as she goes for the Canadian economy—not doing great, not doing too poorly.
BENJAMIN REITZES SENIOR ECONOMIST BMO CAPITAL MARKETS
“Housing should also be a small positive, but that can’t be counted on going forward. And business investment looks to be weak once more — the oilsands continue to weigh pretty heavily on that, and in the oil sector in general.”
Reitzes added that the economy is “not as good as we had been hoping for a couple months ago, but not terrible either.”
Another indicator of how soft or sturdy the economy may be will come Friday, when Statistics Canada reports employment activity for November.
Many analysts are expecting a decline of between 10,000 and 20,000 jobs during the month, following a strong gain of more than 44,000 in October — the same month as the federal election, which required the government to hire temporary workers for polling stations and related voting activity.
After that temporary boost in jobs, many analysts are predicting the unemployment rate will rise to 7.1 per cent in November from seven per cent the previous month.
“Employment numbers are always tough to call,” said BMO’s Reitzes. “We had sizable election hiring last month (but) we look for that to move the other way (in November).”