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Can you trust Canada’s economic bump?

Statistics Canada building and signs are pictured in Ottawa in July 2019. The Canadian Press/Sean Kilpatrick
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44.9 per cent: That’s how much net income for domestic firms rose in the third quarter of 2020, according to Statistics Canada data released Friday suggests. Net income rose to $81 billion on operating revenue of about $1.06 trillion, with overall profits getting back to growth after two consecutive down quarters.

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Firms that have borne the brunt of COVID-19 lockdown measures saw a modest recovery. The “arts, entertainment and recreation and accommodation and food services” industry posted a collective $35-million net profit, swinging from a $1.7-billion loss in the second quarter. Revenue in professional, scientific and technical services—a category that includes a lot of innovation-economy firms—has remained relatively steady through the pandemic, but saw net income drop in the second quarter. Between July and September, sector firms posted a profit of $2.6 billion, ahead of the $2.5 billion in the first three months of the year.

Will it last?: Don’t bet on it. There’s reason for “concern about near-term spending trends in the services sector with regions re-imposing virus containment measures on businesses like restaurants and gyms,” RBC economist Rannella Billy-Ochieng wrote in a note, pointing to a “broad narrative of a slowing recovery that’s gradually losing steam.”

The retail recovery: Another StatCan release Friday showed retail activity continued to recover in September. Sales excluding auto rose 1.1 per cent month over month to $53.9 billion. StatCan attributed the growth in part to food and beverage. But the increases don’t necessarily reflect shoppers pandemic-buying canned beans and KD again. Grocery sales actually dropped marginally month over month; sales at specialty food stores rose 6.2 per cent and beer, wine and liquor stores were up 4.4 per cent. All that consumption is still ahead of February levels. 

E-commerce also had a good month, with 5.6 per cent of retail sales being online, up 0.5 percentage points “despite more retailers expanding in-person shopping in accordance with public health measures,” StatCan said.  

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Better than expected: September’s retail results looked even better to economists because the agency’s early forecast had them flat; the consensus prediction was a 0.2 per cent overall increase. “Most subsectors are above where their sales volumes sat before the pandemic struck,” Derek Holt, Scotiabank head of capital markets economics, wrote in a note. “The main exceptions are gas stations (lower gas prices, less driving) and clothing (ah those all-day wfh pyjamas…).” Bucking that trend: this reporter’s recent acquisition of several new pairs of shoes, even though he has no place to wear them.