The Canadian economy jumped ahead in November, with output rising 0.4% month-on-month as the manufacturing and resource sectors came back to life following earlier setbacks. 17 of the 20 major industries saw output gains, the broadest base of expansion since April 2017.
The goods producing side of the economy led the way, up 0.8% month-on-month. With production resuming at several major auto plants following earlier shutdowns, manufacturing jumped 1.8%. This was the largest monthly gain in three years, supported by a 14.3% increase in motor vehicle manufacturing. Resource extraction also gained, up 0.5%. The increase was largely due to the oil and gas sector as production continued to improve following earlier maintenance activities at several facilities.
The service industries remained steady performers, recording a 20th straight monthly expansion. Aggregate services output rose 0.3%, helped by solid retail and wholesale trade figures (up 0.6% and 0.5% respectively).
When it comes to economic growth, what goes down usually pops back up, with the November GDP figures the perfect example. Earlier setbacks in key sectors, including retooling at key auto production facilities and disruptions in the oil sector have since been resolved. The result was a solid headline gain of 0.4%.
Equally important to the strength of growth was its breadth. The Canadian economy fired on all cylinders in November: production resumptions led the way, but nearly all major sectors reported gains on the month, an encouraging sign.
Just as one should ‘look through’ one-off shocks such as maintenance shutdowns, the pop in activity that occurs as production comes back online should also be discounted. That said, as shown by this month’s breadth of growth, the underlying trend for the Canadian economy remains a positive one: economic growth of around 2.4% (annualized) looks likely for the fourth quarter of 2017, confirming the spate of positive economic indicators that have so far characterized the end of last year.
The Bank of Canada will undoubtedly be encouraged by today’s report, not least as it confirms their most recent economic growth tracking. Confirmation does not mean a change in view however, and today’s report does little to change the notion that the balance of economic fundamentals vs risks suggests July is the most likely timing for the next rate increase.