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Quebec: Real GDP Growth Climbed to 3.5% in the Third Quarter
By Hélène Bégin, Senior Economist
HIGHLIGHTS
f Annualized real GDP growth reached 3.5% in the third quarter, up from 2.6% the previous quarter.
f Annualized household consumption spending rose significantly in the third quarter, reaching 14.0%.
f The continued rebound in spending on services (+28.3%), was a decisive factor, while spending on goods ticked up (+1.6%).
f The savings rate only fell slightly, going from 17.9% in the second quarter to 15.8% in the third quarter. Strong income growth helped keep the savings rate high.
f Annualized residential investment saw a sharp drop of 25.4%.
All components lost steam: new construction, renovations and commissions paid to real estate brokers.
f The recovery in business investment was followed by a major drop in the third quarter, with declines of -28.8% for non-residential structures and -10.6% for machinery and equipment.
f Exports grew an annualized 9.2% in the third quarter, beating out imports (+5.4%). Quebec’s trade deficit shrank to $18.0B in 2012 dollars.
f The cumulative variation in real GDP for the first three quarters of the year stood at 7.3% in Quebec, compared to 5.1% in Canada.
COMMENTS
The rapid growth in real GDP is due to strong household spending and an improvement in international trade. However the results for business investment are disappointing. The lull in the residential sector was expected after a period of bustling activity, which appeared difficult to maintain. As anticipated, consumption spending sped up in Quebec in the third quarter
ECONOMIC STUDIES | DECEMBER 22, 2021
thanks to the strong rebound in spending on services over the summer. The lifting of public health restrictions, particularly reopening restaurants for the tourist season, had a major impact.
However, the opposite effect is to be expected in the coming weeks.
IMPLICATIONS
Quebec’s economic growth of 3.5% far exceeded forecasts for the third quarter. However, historical revisions have muddied the waters. The results were revised downward from 3.4% to 2.6% for the second quarter of 2021 and from 7.7% to 4.1% for the first quarter. For 2021 as a whole, real GDP growth should therefore be around 6.5%, as anticipated in early December.
However, the new public health restrictions in place since December 20 will hamper economic activity in late 2021 and early 2022. We will need to keep a close eye on the situation when the restrictions are lifted and whether additional measures are applied in an attempt to curb the spread of the Omicron variant. Uncertainty has ratcheted up and the economy will be impacted again, at least until early 2022.
