By Kim Mackrael
OTTAWA--Canadian economic output surged past market expectations in August, adding to evidence of a strong bounceback following virus-related shutdowns that tanked activity in the spring.
While the August data has Canada on track for a massive surge during the third quarter, an early estimate for September suggests the economic recovery from this year's pandemic-related shutdowns has moved into a slower phase.
Statistics Canada on Friday said Canada's gross domestic product in August climbed 1.2% from the previous month, to 1.904 trillion Canadian dollars (US$1.426 trillion). Market expectations were for a 0.9% increase, according to economists at Desjardins Securities.
The August advance means economic activity in Canada is now about 5% below its level in February, before governments shut down many businesses to curb the spread of the new coronavirus.
The data agency also estimated that GDP rose by 0.7% in September.
The August and September figures suggest GDP likely surged by more than 46% at an annual rate in the third quarter, several economists said. That represents a big comeback after economic activity plunged 38.7% in the April-to-June period.
Still, economists warned the relatively weaker data for September shows the economic recovery won't continue at the same pace.
"It appears that the economy was slowing more than expected heading into the fourth quarter," said Royce Mendes, an economist at CIBC Capital Markets. Given a recent resurgence in cases of Covid-19, the disease caused by the new coronavirus, he said it's likely that GDP will barely show any growth in the October-to-December period.
The seven-day average of reported Covid-19 cases in Canada has roughly doubled during the past month, according to data from Johns Hopkins University, prompting restrictions on indoor dining and bar service in some cities. The Bank of Canada warned earlier this week that the economy had entered a slower phase of its recovery, in part because some regions are experiencing a second wave of the pandemic.
"We're going to get through this, but it's going to be a long slog," Bank of Canada Governor Tiff Macklem told reporters on Wednesday. He said the central bank expects to keep its benchmark interest rate at 0.25%, which officials consider the lowest effective level, until at least 2023.
The Statistics Canada report showed that the August advance was relatively broad-based, with 15 out of 20 sectors tracked by the data agency showing gains in the month. The public sector advanced 1.9% in August, with strong advances in educational services, health and public administration. Professional services advanced 2.2% in the month, and the manufacturing sector grew 1.2%.
Write to Kim Mackrael at kim.mackrael@wsj.com
(END) Dow Jones Newswires
10-30-20 1007ET
