Canada’s economy unexpectedly shrinks in third quarter

Canada’s economy shrank 0.3% in the third quarter of the year compared to the preceding three-month period, while marking the first contraction since Q2 of 2021. That followed a revised up 0.3% QoQ expansion in the second quarter.

The nation’s GDP was weighed down by a 1.3% slump in the exports of goods and services, Statistics Canada reported. Meanwhile, imports of goods and services decreased at a slower 0.2%.

Inventories accumulated at the slowest rate in two years, while household expenditures remained broadly flat compared to the previous quarter.

The data suggested that the Bank of Canada’s higher interest rates were being transmitted at a greater extent to the economy.

In annual terms, Canada’s economy shrank by 1.1% in the third quarter, which confounded market expectations of a 0.2% expansion. That followed a revised up 1.4% year-on-year GDP growth in the second quarter.

The Canadian Dollar was slightly weaker against its US counterpart on Thursday, with the USD/CAD currency pair last trading at 1.3607. The Canadian currency pulled back from a two-month high of 1.3541, which it registered on Wednesday.