The Canadian economy is doing quite alright, despite pessimism in the last two years that low oil prices and a weak Canadian dollar had turned us into the world’s biggest laggards. Our economy grew at its fastest pace in two years this quarter, driven mainly by a boost in oil-related exports. Yes, whether we like it or not, oil seems to have prevailed.Real gross domestic product (GDP), the most widely used measure of economic growth, rose at an annualized rate of 3.5 percent in the quarter ending September 30, according to Statistics Canada. Just to give you a sense of how significant this is, last quarter, the Canadian economy shrank by 1.6 percent (on an annualized basis), the largest decline in GDP since Canada was in the throes of the financial crisis back in 2009.
So what exactly changed? The Fort McMurray wildfires back in May of this year really messed with our economy, mainly because of the temporary shutdowns in oil sands production, the mass evacuations that ensued, and the overall disruption to employment in the area. The jump in growth that we’re seeing in the third quarter of this year, although impressive, is to some extent, reflective of a return to normalcy in the oil sector. Indeed, energy exports alone jumped 6.1 percent this quarter.GDP is a cumulative measure of how much the public and private sectors contribute to our collective spending, which gives us a sense of how fast the wheels of our economy are spinning. To break it down even more, GDP is a combination of consumer spending, government spending, investment by businesses, and net exports.We Canadians certainly did our part in boosting economic growth in the third quarter of 2016, spending slightly more that we did in the second quarter of the year. The consensus among economists was that spending rose at an annual rate of 2.6 percent partly because of Ottawa’s Canada Child Benefit plan that kicked in in July promising up to 90 percent of Canadian families a better child benefit package.“Given the lift provided by family benefit cheques sent out by Ottawa—which helped household disposable income grow at an annualized rate of 8.9 percent—there’s room for more spending ahead.” said a CIBC Economics research note.According to BMO economist Douglas Porter, what’s encouraging about today’s figures is the surprisingly solid performance by our economy at the end of the quarter (meaning September), which he says will set the stage for respectable growth in the fourth quarter of the year. “Based on today’s figures, we would now be looking at annual growth of 1.4 percent this year, and roughly 2 percent in 2017.”But TD Economist Brian DePratto seems to be much more cautious than that. In a research note, he said the bulk of the gain that we’re seeing this quarter can be attributed to one-time events. “Absent the post-wildfire resumption of energy production, the quarter would likely have been much weaker.”Vanmala is VICE Canada’s Money & Economics Editor. Follow her on Twitter
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