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, helping to explain the strength.
* In addition to helping to fuel consumer spending, 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, largely reflecting a decline in imports that was the biggest since 2009. About one-third of the decline could be explained by 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.
The recovery in crude prices at the end of last year, and the fading impact of the wildfires earlier in 2016, helped produce the country’s best performance since the beginning of the oil shock in 2014.
It will also test Bank of Canada Governor Stephen Poloz’s resolve in asserting that the nation’s economy is lagging considerably behind the U.S. in terms of economic slack, since growth in Canada was faster in the fourth quarter.