Statistics Canada reported this morning that real GDP increased at an annualized pace of 40.5% in the third quarter, after declining by a revised 7.3% in the first quarter and 38.1% in the second. Despite the significant gain last quarter, economic output remained 5.3% below the fourth quarter of 2019. This sharp rebound was not unexpected given the strong economic indicators we witnessed over the summer months. What was particularly striking in this morning’s data was just how uneven the recovery has been.
Households poured some of their substantial savings into the economy in the third quarter, boosting their real spending by an annualized 62.8% and pushing down the savings rate to a still elevated 14.6%. All major categories of household spending increased, but durable goods posted a remarkable increase, growing by 263% at annual rates. Real spending on durable goods is now 7.7% above its fourth quarter of 2019 levels. Services also posted strong growth in the quarter but have borne a disproportionate share of the prior consumer spending contraction as the pandemic makes it more difficult, or impossible in areas back under lockdown, to participate in in-person social activities. Spending on services remains 12.4% below its quarterly pre-pandemic average.
Another sector of the economy that has rebounded beyond its pre-pandemic level is residential investment. Resale housing activity has been posting record breaking growth in many of the past few months and that led to an annualized 1,826% increase in ownership transfer costs. Renovation spending also rebounded in the quarter. Overall, residential investment grew 187.3% in the third quarter and is now 10.3% above its pre-pandemic levels.
Categories: E-Sight, Economics, Statistics Canada
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