OTTAWA - Canada's economy bounced back to life in the third quarter after an unexpected dip during the spring that appears to have been primarily caused by temporary factors.
The country's real gross domestic product expanded by a better-than-expected 3.5 per cent in the July-September period, more than reversing the second quarter's half-point contraction.
"Although the quarterly increase was somewhat larger than the three per cent that we and the market had forecast, the overarching theme of a bounce-back in activity was evident in the data," TD Securities economic strategist David Tulk wrote in a note to clients.
"In particular, the external sector led growth in contributing just over five per cent to the headline on the strength of a 14.4 per cent annualized increase in exports and a 3.2 per cent contraction in imports."
Statistics Canada noted that real GDP in the United States grew at a more tepid two per cent over the same period.
The big lift came from net exports, which raced ahead by 15 per cent annualized during the three-month period, an indication manufacturers ramped up production after the spring's supply disruptions caused by the Japanese tsunami.
As recently as last month, the Bank of Canada had pegged the third quarter rebound at two per cent, noting the weakening global outlook and loss of business and consumer confidence that followed financial market turmoil in August.
Governor Mark Carney has since declared economic indicators were coming in stronger than believed, however.
But analysts cautioned against overestimating the strength of the Canadian economy. Much like the second, the third quarter was also driven by temporary factors that won't be sustained, they said.
"I don't share the euphoria sweeping through in the after math of this report," said Derek Holt, vice president of economics at Scotiabank.
"Growth was very narrowly based almost exclusively through the lifting of supply shocks to trade, which make the gain temporary in nature in my opinion. While positive growth is still likely into Q4 and beyond, it will likely be at a vastly more subdued pace."
CIBC's Emanuella Enenajor noted that September's advance was a weaker than expected 0.2 per cent, from August, making for a soft handoff to the fourth quarter.
Still, most economists expect the last three months of 2011 will show double the growth of the Bank of Canada's dour 0.8 per cent call.
Aside from exports, the third quarter was a much more subdued affair.
Consumer spending on goods and services rose 0.3 per cent in the third quarter, slightly below its second quarter gain of 0.5. Government expenditures on goods and services grew 0.2 per cent. Housing investment strengthened to 2.6 per cent, well above the second-quarter pace of 0.4.
However, business investment in plants and equipment fell 0.9 per cent, its first quarterly decline since 2009.
Statistics Canada said final domestic demand has been slowing throughout 2011 compared with 2010. On average, it has recorded quarterly growth of 0.5 per cent since the start of the year, down from the average quarterly growth of 1.1 over the same period of 2010.
Both the goods-producing industries (up 1.4 per cent) and the service industries (0.6 per cent) grew in the third quarter.
The energy sector led the way and notable increases also occurred in manufacturing, construction, wholesale trade and the transportation and warehousing sector.
