Canada’s GDP Data: Don’t pop the Champagne just yet

Finally some good news!

On Monday Statistics Canada reported the Canadian economy grew more than expected in August. Real GDP rose 0.3 per cent. Economists were expecting 0.2 per cent. I know, not exactly blowing past expectations, but better than expected is nicer than the alternative.

The major reason for these rosy results is higher oil production in the gas producing provinces like Alberta and Saskatchewan.  The data is giving hope that Canada will stave off a third negative quarter and avoid declaring a recession for the second time in three years.

But there are still a number of head winds that Canada is facing that make the third quarter results harder to predict. The higher oil production in August is mainly due the pop in oil prices this summer. The GDP results for August showed manufacturing is down, output of utilities is down and wholesale trade tumbled.

What does this mean?

As a nation we are still making less, selling less and using less to control costs. That is the major hurdle Canada still faces to get back to the roaring economy we had 4 years ago.

Canadians are eternally optimistic. So am I, we love to celebrate even the smallest of victories. Getting a bronze medal, coming in second and having slightly better than expected economic reports.  That may be one of our greatest strengths that we’re able to smile in the face of adversity.

But one positive GDP report does not a strong economy make.  Soon, Statistics Canada will be releasing its unemployment data for October and currently the TSX is suffering wild swings again because of the debt issues that continue to plague countries oceans away.

The positive news has to start somewhere, but I would be cautious and not start celebrating the end of bad economic times just yet. This GDP report could just be an anomaly. Just as we have seen in the past with unexpected unemployment numbers this is not an indication that all is okay.

November 30th is the big day to watch, when Statistics Canada releases it GDP data for the third quarter. If that report comes in positive there will be a reason to take a collective sigh of relief.

Greece is the best example of celebrating to early. Last week markets rallied on the news the debt-laden country would see half its debt written off and the country would FINALLY be able to get it affairs in order.

But, refusing to take instruction from Germany and France, the Greek government has decided to hold a referendum on the new deal. Without a doubt the citizens of Greece don’t want see more strict austerity measures brought in.  One of the conditions of this debt write-off plan. In consequence, the world is back to square one and markets are falling again.

Canadians take comfort in knowing our country is not suffering as badly as we thought. That is our eternal optimism is shining through again. But remember, tread carefully before declaring a victory. I am often accused of being all doom and gloom,  but I would prefer to say I am cautiously optimistic.

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