But can it last?

After contracting marginally in the second quarter of the year, Canada's real GDP rebounded strongly in the third quarter. Data released today by Statistics Canada show that real GDP rose 1.3 percent in the quarter, or about 5.4 percent at an annualized rate, well ahead of market expectations. Early indications are that the strong pace continued into the current quarter, but obviously the new COVID variant will have something to say about whether that can last. 

With COVID restrictions easing, it is no surprise to find that household spending was responsible for much of the growth in Q3. Spending on both semi-durables and services rose sharply: by 14 percent and 6.3 percent respectively. This was partly offset by a 1.4 percent fall in spending on durables. StatsCan attributes this to ongoing supply chain issues, which "constrained demand and spending". Some analysis from business economists suggests it may have been an outright lack of product to buy -- notably  automobiles -- that held durables spending down, rather than simply price considerations. 

The other main source of growth in Q3 was the trade sector. Real imports fell -- those supply chain issues again -- but exports were 1.9 percent higher in volume terms. The increase in exports was largely driven by shipments of crude oil to the United States, as the Alberta oil patch enjoys one of its periodic booms. 

StatsCan also provided monthly GDP data for September and an early estimate for October.  Growth was a scant 0.1 percent in September, with notable weakness in goods-producing sectors. However, it appears to have bounced back sharply to an estimated 0.8 percent in October, as manufacturing recovered strongly. 

It seems likely that growth remained robust in November, which all but ensures a strong result for Q4 as a whole. However, the emergence of the new omicron COVID variant at the very end of the month may weigh on the outlook for December and the early part of 2022. That said, the Canadian economy has shown improved resilience as each stage of the pandemic has unfolded, so it is not yet clear that this latest setback will have a severe economic impact. 

In the meantime, the next big event on the data docket comes this Friday, with the release of November employment data. The consensus (never reliable for this very volatile series) looks for the addition of another 30,000 or more jobs, pushing the unemployment rate closer to pre-pandemic levels. Long may the good news continue -- we need a break!