Signals of recession's end

GDP growth signals recession's end

The Canadian economy expanded 0.1 per cent in the third quarter, the first quarterly gain since the third quarter of 2008.

The 0.1 per cent figure reported Monday by Statistics Canada is in quarterly terms. On an annualized basis, the economy grew at a 0.4 per cent pace in the July-September quarter. By way of comparison, the U.S. economy posted a 2.8 annualized gain during the same period.

Economists define a recession as two or more consecutive quarters of economic contraction, so the expansion of the economy after three consecutive quarterly contractions means that, in technical terms, the Canadian recession is over for now.

"[But it's] not exactly a clanging endorsement of the 'end of recession' story," BMO Capital Markets deputy chief economist Doug Porter said.

"This sets the table for a much better fourth quarter, where we are looking for an advance of just over a three per cent annual rate," Porter said.

Real gross domestic product — the country's total output, adjusted for inflation — grew 0.4 per cent in the month of September alone, as most major industrial sectors increased their production, the data agency said.

The September growth came on the heels of flat and negative GDP growth during the first two months of the quarter.

Central bank hoped for more

The Bank of Canada has based its monetary policy on the assumption that the economy would begin to rebound at some point in 2009, but the third-quarter growth was short of the central bank's expectation of two per cent annualized.

"If Canada’s recession was not … over last quarter, it is now," BMO economist Michael Gregory said.

With the modest quarterly growth in Canada, Britain is now the only G7 economy still mired in recession based on quarterly GDP data, he noted.

Service-producing industries increased output by 0.6 per cent, with the wholesale and retail trade sectors and real-estate agents and brokers leading the way.

The story was different among goods-producing industries, where output continued a downward trend that started in the third quarter of 2007 by slipping 1.4 per cent. Mining and oil-and-gas extraction contributed the most to the decrease as a result of temporary shutdowns, Statistics Canada said.

Business investment in machinery and equipment grew 5.9 per cent in the third quarter, following five quarters of decline.

And overall export and import volumes both increased after many quarters of decline, Statistics Canada said.