The Canadian economy expanded by 0.4% in November. This was more than enough to offset the prior month’s upwardly revised 0.2% contraction (initially reported as -0.3%).

The goods-producing industries came back to life, expanding 0.9% during the month, led by mining and quarrying (+1.4%), manufacturing (+1.4%), and construction (+1.1%), all of which rebounded from their October contractions. Within the manufacturing sector, gains were fairly widespread, with output rising by more than 3% on the month in a number of industries, including electrical equipment, chemicals, petroleum and coal products, and machinery manufacturing. Transportation equipment manufacturing fell for a third consecutive month (-0.6%), with the ‘miscellaneous’ category leading the way lower (-5.4%).

On the service-producing side of the economy, it was a generally positive story, as output rose 0.2% in November. Leading the way was finance and insurance (+1.5%; its largest gain in nearly two years), while healthy gains were also recorded in the retail trade (+0.7%), management (+0.4%), and transportation (+0.4%) sectors.

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Key Implications

Canadians were busy in November, resulting in one of the healthiest monthly GDP reports in recent memory. Gains were fairly widespread, with manufacturing nearly reversing the previous month’s losses, while the service side of the economy saw continued growth (although historic revisions undid what was shaping up to be a 15 month expansion streak). The healthy November GDP figures add to the evidence that the Canadian economy continues to shake off some of the setbacks earlier in the year.

For the Bank of Canada, the November GDP figures are not likely to move the needle very much. Growth in the fourth quarter of 2016 is likely to come in ahead of the Bank’s expectations of 1.5%, but a significant amount of economic slack will nevertheless remain. As such, the Bank of Canada will probably be happy to leave its policy interest rate at 0.50% well into the future, helping to support the ongoing absorption of the remaining slack.

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