Real gross domestic product (GDP) grew 0.2% in November after remaining essentially unchanged for three consecutive months, reported Statistics Canada on Wednesday.
The majority of the growth in November came from the goods-producing industries grouping (+0.6%), which saw its highest growth rate since January 2023, as increases in all but one sector drove the gain. Services-producing industries edged up 0.1% in November 2023 despite the impact of the strikes in the Quebec public sector that began in the month. Overall, 13 of 20 industrial sectors increased in November, said the federal agency.
Mikhail Nilov
“Advance information indicates that real GDP increased 0.3% in December. Increases in manufacturing, real estate and rental and leasing, and mining, quarrying and oil and gas extraction were partially offset by decreases in transportation and warehousing, construction, and educational services. Owing to its preliminary nature, this estimate will be updated on February 29, 2024, with the release of the official GDP by industry data for December 2023,” added the report.
“With this advance estimate for December, information on real GDP by industry suggests that the economy expanded 0.3% in the fourth quarter and 1.5% in 2023 as a whole. The official estimates for the fourth quarter and the year will be available on February 29, 2024, when the official estimate of real GDP by income and expenditure is released.”
It said the manufacturing sector rose 0.9% in November, as both non-durable (+1.2%) and durable (+0.6%) goods manufacturing contributed to the increase.
“Non-durable goods manufacturing increased 1.2% in November, the largest monthly gain since May 2023, as all but three subsectors contributed to the growth in November. The chemical manufacturing subsector led the increase with a 1.9% expansion in November as a number of petrochemical plants continued ramping up production following maintenance-related shutdowns in the third quarter. Partially offsetting the increase was a contraction in food manufacturing (-0.4%) in November in large part driven by a decline in the seafood product preparation and packaging industry (-18.2%),” said StatsCan.
“Durable goods manufacturing posted a 0.6% increase in November, partially offsetting the decline observed in October, with 7 of 10 subsectors contributing to the growth. Primary metal manufacturing (+3.8%) led the increase, recording its largest growth rate since August 2020, in large part due to recovery from factory shutdowns that occurred in October 2023. Machinery manufacturing (+1.7%) rose for the fourth time in five months in November, led by commercial and service industry machinery manufacturing (+13.0%) and coinciding with an increase in exports in the month.”
The federal agency said mining, quarrying and oil and gas extraction grew 0.3% in November as two of three subsectors were up, led by the oil and gas extraction subsector.
“Oil and gas extraction (+1.5%) grew solely on the strength of a rebound in oil sands extraction. Oil sands extraction rose 3.8% in November, the largest monthly growth rate since April 2022, as an increase in synthetic oil production along with crude bitumen benefited from a completion of maintenance work at several upgrading facilities in Alberta. Oil and gas extraction (excluding oil sands) contracted 0.7% as lower crude petroleum and natural gas extraction contributed to the decline,” it said.
“Mining and quarrying (except oil and gas) contracted 1.3% in November in large part due to the metal ore mining industry (-2.2%), which posted its largest decline in a year, as most of its components were down in the month. Copper, nickel, lead, and zinc mining posted a second consecutive decline, down 7.1% in November, as maintenance activity continued to limit production at a copper mine in British Columbia. Lower gold and silver ore mining (-3.1%) further contributed to the decrease, coinciding with lower exports of the metals.”
Doug Porter, Chief Economist with BMO Economics, said Canada had a far firmer growth backdrop to end 2023 than expected, and this points to an upward revision to 2024 estimates.
“In turn, there’s also less pressure on the BoC to start cutting any time soon. This solid result, after a long dry spell for growth, affords policymakers the ability to gently push back on easing chatter, as they wait for underlying inflation to come down further,” he said.
Marc Ercolao, Economist with TD Economics, said November’s GDP print surprised against expectations that the economy would advance at a more modest 0.1% m/m pace.
“With today’s print and guidance for a December GDP rebound, fourth-quarter GDP is tracking just over 1% quarter-on-quarter annualized. This is roughly in line with our own expectations and materially above that of the Bank of Canada’s (BoC) newly revised projection of no growth,” he said.
“The Canadian economy looks to be finishing the year on a stronger note than most expected. Markets are still focused on the timing of rate cuts, but a heating up of the Canadian economy may push expectations for a first cut further down the line. Markets are leaning towards a rate cut by the spring, when it is expected that trends in both growth and inflation will be in the Bank’s comfort zone. While the BoC re-mains in a holding pattern as it awaits confirmation that inflation will decisively settle at their 2% inflation target, strong data prints like today’s GDP release will be keeping the Bank on their toes.”
Andrew Grantham, Senior Economist with CIBC Capital Markets, said the Canadian economy returned to growth towards the end of 2023, and somewhat more emphatically than anticipated.
“November GDP pointed to a 0.2% advance in activity, which was slightly better than the consensus forecast and advance reading for a 0.1% gain. Manufacturing posted a strong advance, helped partly by some petrochemical plants raising production again after maintenance shutdowns. Wholesale trade also increased, and transportation rebounded after the St Lawrence seaway strike. Education services fell due to strike activity in Quebec that started in November. The advance estimate for December pointed to a further 0.3% gain in activity led by manufacturing, real estate and mining, oil & gas,” he said.
“For the fourth quarter as a whole, the economy appears set for growth of around 1.2% annualized, rebounding from Q3’s contraction. While that would be better than the flat reading penciled into the Bank of Canada’s latest MPR forecasts, recent history has shown that these early GDP by industry data can differ significantly from the later released expenditure figures. Moreover, even if the rebound in Q4 is confirmed, it is clear that it has been driven by an easing of some previous supply constraints rather than necessarily an improvement in domestic demand. We still suspect that upcoming employment and CPI releases will be most important in determining when the Bank of Canada may start to cut interest rates.”
Claire Fan, Economist with RBC Economics, said the reacceleration of growth towards the end of 2023 should be taken with a grain of salt – early GDP estimates are revision-prone and a lot of the strength in November was due to one-off factors such as recoveries from earlier factory shutdowns and strike activities that are unlikely to be repeated in the following months.
“Taking the advance December estimate at face value, growth in Q4 is tracking an annualized increase of 1.2% which is above our tracking for a small decline. That however would still mark a sixth consecutive quarterly decline when growth is counted on a per-capita basis, as population growth continues to surge. Overall we continue to expect pressures from elevated interest rates to curb consumer demand, stalling growth in both output and inflation over the first half of 2024 before the BoC is expected to cut rates in June,” she said.
Mario Toneguzzi
Mario Toneguzzi is Managing Editor of Canada’s Podcast. He has more than 40 years of experience as a daily newspaper writer, columnist, and editor. He was named in 2021 as one of the Top 10 Business Journalists in the World by PR News – the only Canadian to make the list
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