OTTAWA – Surging exports helped revive Canada’s economy in the third quarter after an unexpected spring swoon that now appears to have been solely attributable to temporary factors.
The country’s real gross domestic product expanded by a better-than-expected 3.5 per cent in the July-September period, more than reversing the second quarter’s half-point contraction.
The big lift came from exports, which grew 14 per cent on an annualized basis during the quarter and contributed about five percentage points to overall GDP.
While that is encouraging for Canada’s battered manufacturing sector, it also sets the economy up for a disappointment going forward, said analysts.
A rebound in exports was widely expected, given the second quarter had seen just as massive a decline, triggered by supply disruptions from the Japanese tsunami in March and temporary shutdowns in Canada’s mining sector.
“Growth was very narrowly based almost exclusively through the lifting of supply shocks to trade, which make the gain temporary in nature, in my opinion,” said Scotiabank economist Derek Holt.
“While positive growth is still likely into Q4 and beyond, it will likely be at a vastly more subdued pace.”
Going forward, the exports boom in the third quarter means the foreign sector-based part of the economy will likely drag down growth in the fourth, he noted.
TD Bank chief economist Craig Alexander concurred “it won’t last,” adding growth going forward should slow to around two per cent, “which is not a bad rate.”
“It sort of makes the case that as long as Europe doesn’t create a global financial crisis, the most likely scenario is we are going to continue to have economic growth — not as strong as 3.5 per cent, but we are likely to get growth.”
On Wednesday, central bankers across the advanced economies, including Canada, launched a co-ordinated action to help European banks get access to U.S. funding
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