OTTAWA - Canada's economy expanded marginally in September and only slightly more in the third quarter, in what's widely seen as a final spasm of growth before what could be a painful period of decline.
"Last call, the last hurrah, the last gasp, the final scene, the credits are rolling .... call it what you will," BMO Capital Markets economist Douglas Porter said Monday after Statistics Canada tallied third-quarter growth of 0.3 per cent in gross domestic product -- the country's total production of goods and services.
September growth came in at 0.1 per cent.
"Fourth-quarter GDP will quite likely be negative, as the deepening U.S. downturn digs more heavily into exports and domestic demand is hit by sagging consumer and business confidence," Porter predicted.
The Canadian economy has slowed to a crawl for most of this year as falling commodity prices, a corporate credit squeeze and troubles in the manufacturing sector have hit all the parts of the country. The current 6.2 per cent jobless rate is expected to climb to seven per cent or higher next year before a recovery expected in 2010.
While that's far below the 13 per cent unemployment in the early 1980s recession and 10 per cent in 1991-93, the weakening economy is expected to shed tens of thousands of jobs over the next few months.
The Statistics Canada report Monday showed almost all of the growth in the July-September quarter came in a 0.7 per cent spurt in July, following a flat performance in the first half of the year. Inflation-adjusted GDP sank 0.5 per cent in August -- revised from an originally reported 0.3 per cent decline -- before September's bare 0.1 per cent gain.
Statistics Canada said production of goods rebounded in the summer quarter after four straight quarterly declines, led by mining, oil and gas and construction. Manufacturing edged up while forestry kept deteriorating.
Output in services continued to grow, with gains in the public sector and, to a lesser extent, in retailing and wholesale trade.
On an annualized basis, the overall economy grew at a rate of 1.3 per cent in the third quarter, compared with a 0.5 per cent rate of decline in the United States.
Canada's annualized number was almost double the private-sector economist consensus estimate of 0.7 per cent.
"However, much of the upward surprise came from a larger-than-expected decline in imports and rise in inventories that likely in large part reflect softer domestic spending," commented Royal Bank economist Paul Ferley.
"As well, the downturn in growth in the U.S. and continuing tight credit conditions are expected to have a more dominant impact, sending growth into negative territory over the next two quarters despite the modest rise in growth in Q3."
Ferley expects the Bank of Canada to support activity by cutting its key interest rate next week by half a percentage point to 1.75 per cent.
Statistics Canada said exports fell 1.4 per cent in the third quarter, the fifth consecutive quarterly decrease. And growth in personal spending slowed to 0.2 per cent, the weakest in almost five years.
But investment in housing was steady and business investment in plant and equipment edged up 0.2 per cent, powered by 1.5 per cent growth in investment in engineering projects.
Corporations recorded strong third-quarter profit growth of 5.7 per cent, and farm income was also up substantially. Personal incomes grew 0.7 per cent.
