OTTAWA (Reuters) – Canada’s economy notched record growth in the third quarter, with real GDP expected to climb 0.2% in October, Statistics Canada said on Tuesday, though analysts cautioned the rebound would stagnate in coming months amid renewed COVID-19 restrictions.
Canada’s Q3 annualized growth soared 40.5%, rebounding from a historic plunge in the second quarter, while September real GDP rose by 0.8%. Both the quarterly and monthly numbers missed analyst expectations.
Despite the gains, total economic activity remains about 5% below February’s pre-pandemic levels, Statscan said.
“We already knew we had a rapid bounce back in economic activity in the third quarter,” said Nathan Janzen, senior economist at RBC. “The concern now is how much of that can be sustained with the accelerating virus spread.”
Canada is in the midst of a harsh second wave of COVID-19 infections and a number of provinces have already imposed new restrictions, and in some cases targeted lockdowns, in an effort to stem the spread.
That will likely impact economic growth, said economists, warning activity could contract late this year, leading to a far smaller Q4 annualized gain.
“Much of the focus is now on the fourth quarter and what happens early next year,” said Doug Porter, chief economist at BMO Capital Markets, though he added the “modest growth” seen for October was encouraging.
“The economy had a bit of momentum going into the shutdowns,” he said.
On Monday, Canada’s Liberal-led government unveiled a historic C$381.6 billion deficit and pledged up to C$100 billion in stimulus spending to “jumpstart” the recovery, once the virus is under control.
The Canadian dollar was trading 0.3% higher at 1.2959 to the greenback, or 77.17 U.S. cents.
(Reporting by Julie Gordon, additional reporting by Dale Smith, Fergal Smith, Jeff Lewis and Moira Warburton. Editing by Steve Scherer, Andrew Heavens and Paul Simao)