OTTAWA – The economy grew by 0.3 per cent in October, the fourth consecutive month-to-month increase, with the battered manufacturing sector and service industries making significant gains.
The results came in ahead of expectations for a gain of 0.2 per cent in October, compared with September’s increase of 0.3 per cent.
TD economist Francis Fong says the performance starts the fourth quarter off at an annualized rate of 2.7 per cent, the highest since May 2012 and above the Bank of Canada’s latest estimates.
The central bank estimated in October that the national economy will grow by an annualized rate of 2.0 per cent in the fourth quarter, resulting in a 1.6 per cent annual increase for all of 2013.
“For the Bank of Canada, a positive surprise for Q4 growth would be a welcomed holiday gift, but one that is unlikely to change their position on monetary policy,” Fong wrote in a commentary. “With inflationary pressures decidedly muted, we see little reason for the bank to move off the sidelines until 2015.”
Statistics Canada said output from goods-producing industries was up 0.4 per cent in October. Several sectors were essentially flat or down slightly, but manufacturing rose sharply.
Manufacturing output increased by 1.3 per cent in October, after rising 1.2 per cent in September. Output of non-durable goods such as chemicals, food and beverage and tobacco produces was up 2.3 per cent while output of durable goods was up 0.5 per cent.
Output from service industries was up 0.3 per cent, with almost all the major industrial sectors showing growth. Wholesale trade was up 1.4 per cent while retail trade increased 0.3 per cent, a decline in some big-ticket sector offset growth elsewhere.
“There were notable gains at food and beverage stores, electronics and appliance stores and health and personal care stores,” Statistics Canada said. “In contrast, retailing activity was down at motor vehicles and parts dealers and, to a lesser extent, at furniture and home furnishings stores.”
BMO economist Sal Guatieri wrote the economy appears to be on a faster growth path in October than the Bank of Canada expected, although his estimate of annualized growth was 2.6 per cent.
“The upturn in manufacturing after two years of lethargy suggests exports have turned up in response to a weaker dollar and stronger U.S. demand,” Guatieri wrote. “The auto industry posted back-to-back monthly gains in excess of two per cent. Services industries also showed broad strength, while wholesale trade sprinted 1.4 per cent.”
He noted construction, which is little changed in the past three months due to steadier homebuilding, was one area of weakness.
In a separate report, Statistics Canada reported that the average non-farm payroll employee earned $918.44 a week in October, up 0.5 per cent from September and up 1.4 per cent over 12 months.
Growth in average weekly earnings compared with a year ago was above the national average in six of the largest industrial sectors, led by construction and administrative and support services.
The average weekly earnings in construction in October was $1,221, up 5.9 per cent over the previous 12 months, with gains in almost all industries in the sector. Average weekly earnings in administrative an support services was $770, up 4.4 per cent from October 2012.
Meanwhile, the Conference Board of Canada said its index of consumer confidence declined in December for the third month in a row, this time by 6.6 points to 80.5.
“Retailers will likely find the results of this month’s survey disheartening, particularly since they apply to the all-important holiday shopping season, when pessimistic attitudes were clearly on the rise,” the Ottawa-based think tank said. “Consumers judged their finances to be in worse shape than six months ago, they were less positive about future job creation, and a majority said it was a bad time to make a major purchase.”