CAD: Real GDP expected to have expanded by 3.2% in 3Q - TDS

Research Team at TDS, expects Canadian real GDP to have expanded by 3.2% (q/q, annualized) in the third quarter, boosted by a rebound in activity following the Alberta wildfires.

Key Quotes

“Net exports likely led the way, as a post-wildfire normalization of energy-product exports and continued steady growth in service exports translated into healthy export growth (+6.9%). With imports up a more modest 3.2%, net exports are expected to contribute roughly 1.1 percentage points to headline growth. Domestically, consumer spending growth (+2.1%) likely continued at a temperate pace, pulled up by durable goods spending, which snapped back from a second quarter contraction. Just as important, business investment appears to have expanded slightly (+0.9%), ending six quarters of contraction as post-wildfire reconstruction provided a small boost. Government spending also likely contributed (+1.6%), but modestly, as the 'automatic' spending associated with May's wildfires faded. Finally, residential investment likely continued to add to growth (+2.9%).”

“September industry level GDP is forecast to increase by 0.2%, though this projection relies importantly on a rebound in serviceproviding industries. Growth are expected to be underpinned by the retail sector while preliminary estimates of crude oil output suggest a positive contribution from energy. Ongoing rebuilding efforts in Fort McMurray and the sharp pickup in housing starts should help push construction output higher while the real estate sector should bounce back as home buyers front load activity ahead the upcoming mortgage rule changes. Offsetting the expected gains in September is a decline in manufacturing output and a sharper contraction in wholesale trade, leaving overall growth muted with risks skewed to the downside. Other negative contributions leading to a downside surprise include a potential pullback in utilities due to warmer than normal temperatures, while a muted rebound in services based on hours worked data mean less of a positive offset.”