People shop at Toronto’s Eaton Centre in this file photo.Tibor Kolley/the Globe and Mail
The Canadian economy picked up speed in late 2023 and appeared to shake off a period of stagnation, getting a boost from the end of various labour disputes and the likely spillover effects of a strong U.S. economy.
Real gross domestic product grew 0.2 per cent in November, outpacing a previous estimate of 0.1 per cent, Statistics Canada said Wednesday in a report. In a preliminary estimate, the agency said the economy accelerated to a 0.3-per-cent gain in December.
Taken together, those numbers suggest the Canadian economy grew at an annualized rate of 1.2 per cent in the fourth quarter, rebounding from a contraction in the summer quarter. Statscan will release more comprehensive data on fourth-quarter performance on Feb. 29, and these figures often vary widely from those published on a monthly basis.
The Canadian economy had stalled since around the middle of last year, weighed down by restrictive interest rates that weakened consumer spending and business investment. After accounting for a population surge, the country’s economic performance has been considerably weaker in per capita terms.
Based on a recent projection, the Bank of Canada expects near-zero growth to persist into early 2024, followed by an upturn as the year progresses.
But Wednesday’s GDP report points to a quicker return of growth, raising the odds of a soft landing, in which inflation is brought to heel without a significant downturn and job losses. The annual inflation rate has ebbed to 3.4 per cent – less than half of the peak in 2022 – and the Bank of Canada is widely expected to begin cutting interest rates by mid-2024.
In a note to clients, Bank of Montreal chief economist Doug Porter said there’s “less pressure on the BoC to start cutting any time soon. This solid result, after a long dry spell for growth, affords policymakers the ability to gently push back on easing chatter, as they wait for underlying inflation to come down further.”
The GDP report indicated that most of November’s growth came from goods-producing industries, which jumped by 0.6 per cent in the month. Output on the services side of the economy grew by 0.1 per cent, despite the impact of strikes in the public sector in Quebec.
Elsewhere, the resolution of various work stoppages led to a bounce back in production. The end of a strike by St. Lawrence Seaway employees contributed to a 0.8-per-cent expansion in the transportation and warehousing industry in November. The film and TV industry resumed many productions after the end of a strike by the Screen Actors Guild-American Federation of Television and Radio Artists.
Output in the manufacturing industry rose by 0.9 per cent in November, helped in part by petrochemical plants raising production after maintenance-related shutdowns. Resource-extraction industries grew 0.3 per cent, with the oil and gas industry expanding by 1.5 per cent.
“Since these sectors are heavily influenced by exports, it seems that the surprising resiliency in the U.S. economy is indeed spilling over into some sectors in Canada,” Mr. Porter said.
The United States has been posting robust growth numbers of late, defying widespread predictions that it would succumb to higher interest rates and enter a recession. The U.S. economy grew at an annualized rate of 3.3 per cent in the fourth quarter, based on a preliminary estimate published last week by the Bureau of Economic Analysis, and by 4.9 per cent in the third quarter.
U.S. consumers are helping to drive that growth, with big spending on restaurants and hotels, among other areas. Americans are considered less rate-sensitive than Canadians, on account of 30-year mortgages that allowed homeowners to lock in low interest rates before the Federal Reserve began to tighten lending conditions.
In Canada, the household debt-service ratio has climbed to a record high, even before many people deal with the impact of mortgage renewals. Consumption is declining on a per capita basis, and the Bank of Canada expects that to continue in the near term.
At last week’s interest-rate decision, the central bank said it is pivoting toward a discussion of how long to keep rates at current levels. The bank’s policy rate was held at 5 per cent, the highest level since 2001.
Still, some core measures of inflation – which strip out volatile aspects of price growth – accelerated late last year, a potential complication for the bank as it tries to bring inflation back to its 2-per-cent target.
“A resilient economy paired with no durable evidence of a soft patch in underlying inflationary pressures make it highly premature to even be talking about rate cuts while hike risk has by no means gone away,” Derek Holt, head of capital markets economics at Bank of Nova Scotia, said in a client note.
Former Bank of Canada deputy governor Paul Beaudry said earlier this week that he expects the central bank to start cutting rates in July, because of the persistence of underlying inflation. “A lot of the core measures haven’t been coming down,” he said in an interview with CIBC Capital Markets.
Mr. Holt of Scotiabank has argued the Canadian economy is stronger than it appears, citing temporary hits from labour disputes and inventory adjustments. “Canada’s economy keeps defying the naysayers who are trying their best to talk it into a bigger problem than is warranted,” he said on Wednesday.
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.
