OTTAWA — Consumers appears to have helped the Canadian economy through a July stumble, as Statistics Canada reported Friday that real gross domestic product dropped 0.1 per cent in the month before rebounding in August.
The July figure was better than the agency’s initial estimate of a contraction of 0.4 per cent, as warmer weather, easing of public health restrictions and lower COVID-19 case counts packed patios and saw Canadians travelling.
The accommodation and food services sector, which has felt the brunt of public health measures restricting in-person services and travel, rose by 12.5 per cent in July, marking the second straight month of double-digit growth.
Air transportation rose 67.7 per cent in the July travel season after fully vaccinated visitors were no longer required to quarantine as of July 5.
The boost in service-sector spending appears to have carried over to August as well into September based on some early indicators for the just-completed month, TD senior economist Sri Thanabalasingam said.
Still, each sector is still well below where it was just before the pandemic struck. The accommodations and food services sector in July was 21.3 per cent below February 2020 levels, while air transportation was nearly 83 per cent below pre-pandemic levels.
“As it starts to close off on its pre-pandemic level, that’s when we can start to see growth slow,” Thanabalasingam said in an interview. “And then moving into the fall and winter, we’re probably going to see some some risks, especially in the form of the the fourth wave and cooler weather, impacting spending in those areas.”
Statistics Canada said total economic activity in July was about two per cent below pre-pandemic levels recorded in February 2020, a gap that closed to one per cent in August when factoring in the agency’s initial estimate of an increase of 0.7 per cent in GDP for the month. The August GDP figure will be finalized at the end of October.
RBC economist Claire Fan wrote that further increases in GDP are going to be harder to come by, particularly into next year as inflation concerns replace worries about growth and central banks, like the Bank of Canada, consider raising their rock-bottom interest rates.
In Canada, the decision would come against the backdrop of promised new federal spending that the Trudeau Liberals pledged on the campaign trail.
A post-election analysis by Rebekah Young, Scotiabank’s director of fiscal and provincial economics, estimated that the $13 billion the Liberals promised in new spending this fiscal year and next could add around two-tenths of a percentage point to output, but may also force the central bank to raise rates sooner than planned.
She wrote that a half-a-percentage-point increase in the target overnight rate would temporarily dampen economic activity by about 0.2 percentage points of GDP, effectively offsetting the fiscal boost.
The central bank has a scheduled rate announcement later this month. BMO chief economist Douglas Porter said the economic indicators released Friday help reinforce the view that the Bank of Canada will further roll back its bond-buying program that is designed to encourage interest rates on mortgages and business loans to go, and stay, low.
While the majority of sectors Statistics Canada tracks grew in July, declines in sectors such as agriculture, utilities and manufacturing more than offset any gains.
Heat and drought in the West cut crop production, except cannabis, to its lowest level since November 2007, while cooler weather in central Canada helped drive down utilities spending by 4.9 per cent. Meanwhile, ongoing supply-chain constraints drove down manufacturing by 1.1 per cent in July.
The construction sector fell by 0.9 per cent, which Statistics Canada said was driven by a third straight month of declines in residential building activity after reaching a record high in April.
“That said, housing markets appear to be perking up again, and these sectors could reaccelerate, particularly if consumers end up spending more time at home again this winter,” said CIBC senior economist Royce Mendes.
This report by The Canadian Press was first published Oct. 1, 2021.
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
