The Canadian economy grew at a 5.4 per cent annual rate in the third quarter, driven by strong spending by households and gains in exports. Households continue to be a strong engine of the recovery, with continued growth in spending on goods but also a welcome return to spending on services as that part of the economy re-opens. That spending was fueled by the largest growth in employee compensation since the year 2000 with wages rising close to 4 per cent in BC and over 3 per cent in both Alberta and Ontario. Strong wage growth and a sixth straight quarter of a double-digit household savings rate signals strong growth ahead for the Canadian economy.
That said, the global economic environment continues to be a confusing mix of booming demand, gummed-up supply chains and an ongoing COVID-19 pandemic. While it appears that the Canadian economy is primed for strong growth, as a small open economy that growth very much depends on the smooth functioning of global supply and demand. As long as supply chains remain challenged, and a further challenge was just thrown their way by flooding across BC’s rail and highway network, growth will continue to be impeded. Fortunately, these are solvable issues that simply need time. Even with choppy growth this year, the Canadian economy will expand close to 5 per cent in 2021 after contracting 5.3 per cent last year. We forecast that the economy will enjoy strong growth in 2022, with real GDP growth of 4 per cent. That growth profile would put the economy on track to return to its potential by mid-2022, as projected by the Bank of Canada.
Copyright British Columbia Real Estate Association. Reprinted with permission.