Canada's economy grew in November: ssshhh!

Statistics Canada reported this morning that Canada's GDP grew 0.3 percent in November.  That's good news, so needless to say it received next to no coverage in the media, though you can read about it here.  November's expansion comes after a decline in September and a flat performance in October, and the growth was quite broad-based, with both goods and services production moving ahead.  Manufacturing output expanded, and there was even some growth in the beleaguered oil and gas sector.

There's every reason to look for further GDP growth in December. The weather was exceptionally mild across most of the country, so the usual weather-related slowdowns in sectors like construction were probably avoided. (As an illustration, the Welland Canal, which links Lakes Erie and Ontario on the St Lawrence Seaway and carries an enormous amount of bulk freight, closed at the very end of December this year without having once frozen over. This hasn't happened for several years).  Even so, the slow pace of activity in the final months of the year has led most forecasters, including the Bank of Canada, to scale back their expectations for GDP growth in 2016 to around 1.5 percent. If the recent bounce in oil prices holds, that may be a little on the low side, but it's not going to be a banner year.

The recovery in growth in November appears to validate the Bank of Canada's decision to keep rates on hold earlier this month. At the same time, the Bank will be watching nervously to see if the recent sharp rebound in the exchange rate persists. Dollar "strength" might imperil the hoped-for growth in non-resource exports that the Bank is looking for to keep the overall economy moving ahead.

Turning back to the December outlook for a second: data for that month will be issued on the same day that the Bank issues its report on overall activity for the entire fourth quarter. Because of the fall in GDP in September, the economy entered Q4 at a lower rate of output than it had averaged in Q3. Even if growth in December matches the November outcome, it's possible that GDP for the full quarter will be slightly down on Q3. If that happens, it's dollars to donuts that the media will ignore the fact that GDP grew for two out of three months in the quarter, and again start to tout the risks of a renewed recession.  Remember you read it here first.