And still it grows

The Canadian economy continues to defy predictions of recession. Statistics Canada reported this morning that real GDP grew 0.1 percent in October, beating its preliminary estimate that growth would be flat. September GDP, initially reported as a 0.1 percent gain, was revised up to 0.2 percent. StatsCan's preliminary estimate for November calls for another 0.l percent gain, so it looks all but certain that GDP for Q4 as a whole will be in positive territory. 

October's growth was entirely accounted for by the services sector, which posted a 0.3 percent gain, led by the public sector and what StatsCan refers to as "client-facing industries.  By contrast, goods producing sectors were almost uniformly weak, with an overall 0.7 percent decline led by falls in resource extraction, utilities and manufacturing. For the manufacturing sector this marked the fourth decline in the last six months.

It is hard to see data such as today's having much impact on the Bank of Canada's rate decision in January. Eking out monthly growth at a 0.1 percent pace seems to be the very definition of the soft landing that the Bank is hoping to achieve. With the full impact of past tightening still to be felt, there is every possibility that the economy will be flat, at best, in early 2023. Thus the path of rates will depend entirely on whether the Bank is satisfied that the rate of inflation really is headed back towards its 2 percent target. 

UPDATE: Also released today without much fanfare, the Department of Finance reported that the Federal government posted a C$ 1.9 billion deficit in October. This means that after seven months of the current fiscal year, the budget has a cumulative deficit of less than C$ 0.2 billion. For comparison, the deficit for the same period of the previous fiscal year was C$ 72.3 billion.