Canada’s indefatigable households kept the country’s economy growing at a 2.6 percent annualized pace in the final quarter of 2016, helping offset what looks to be a deepening slump in business investment.
Statistics Canada also raised its third-quarter growth estimate to 3.8 percent, from 3.5 percent, showing the nation’s economy had its best half-year performance since the final six months of 2013 or before the collapse of oil prices. For the month of December, GDP was up 0.3 percent.
The confirmation that Canada is emerging from the commodity slump should come as a relief to policy makers who struggled to cope with a near-stagnant economy, as the nation dealt with the impact of an oil price shock and faltering export sector.
Economists had estimated a 2 percent annualized gain in the fourth quarter and a 0.3 percent increase in December, according to a Bloomberg survey.
Canada’s economy remains reliant on consumption. Household expenditures contributed 1.9 percentage points to growth, followed by government spending at 0.5 points. Compensation of employees recorded the largest increase since 2011.
Canada’s red-hot housing markets also triggered a rebound in residential investment, which added 0.4 percentage points to growth. That’s the first gain since the first quarter.
The trade sector was by far the biggest contributor to growth, adding about 5.3 percentage points, reflecting a decline in imports that was the biggest since 2009. About one-third of the decline came from the shipment in the third-quarter of a major oil platform. Falling oil imports was another major component.
Businesses activity was less impressive in the final quarter. Non-residential business investment was down 17 percent on an annualized basis, reducing GDP by 1.8 percentage points. They also met some of their demand by drawing down inventories considerably in the fourth quarter, by an amount that reduced GDP by 2.8 percentage points.