The Canadian economy was treading water at the end of 2022, the latest GDP report shows, but beneath the disappointing data is resilient consumer spending keeping the economy afloat.
The report, which said the economy contracted by 0.1 per cent in December, showed a much grimmer economy than forecasters were expecting as higher interest rates took a more noticeable toll on the economy.
Statistics Canada’s preliminary estimate had predicted 1.6 per cent annualized growth for the quarter.
But Statistics Canada expects the economy bounced back in January, posting 0.3 per cent growth in real GDP.
The fourth quarter also included some silver linings for Canadians. After declining by 0.1 per cent in the third quarter, household spending bounced back by 0.5 per cent in the fourth quarter.
TD’s director of economics James Orlando said the consumer, which is “the real engine of the Canadian economy,” is still faring relatively well.
“Overall, the headline print looks really bad. But when you pull back the lens … Some of the underlying fundamentals are still coming in quite good for the Canadian economy,” Orlando said.
The fourth quarter slowdown was largely driven by businesses accumulating less inventory than in the previous two quarters.
Orlando said inventories reached record levels earlier in the year as a result of easing supply chains. But that accumulation wasn’t expected to last.
In addition to lower inventories, real business investment declined for a third consecutive quarter as higher interest rates weakened housing investment in 2022.
Although growth stalled for the quarter, Canadians saw their disposable incomes rise faster than their nominal spending, allowing them to save more money.
The federal agency said the household savings rate was six per cent in the fourth quarter, up from five per cent the previous quarter.
The report partly attributes this improvement in household finances to government benefits, including the one-time top-up to the GST tax credit and a 10 per cent increase in Old Age Security payments for seniors aged 75 years and over.
The Liberal government introduced these measures targeted at lower-income Canadians to help them cope with higher inflation.
“All of this together means more money in the pockets of Canadians and … that Canadians are going to spend more,” Orlando said.
Looking ahead, Orlando said recent economic data has been coming in “much better than expected.”
The latest labour force survey showed the economy added 150,000 jobs last month, suggesting there’s still steam on the hiring front. Retail sales were also up in January.
These figures support forecasts for a rebound for economic growth in January.
But most economists expect the Canadian economy won’t be able to avoid a recession in the first half of the year as higher interest rates dampen spending.
Since March, the Bank of Canada has raised its key interest rates from near-zero to 4.5 per cent, the highest it’s been since 2007.
The central bank announced in January it would take a conditional pause on hiking rates to assess how the economy is responding to higher interest rates.
If the economy continued to run hot or inflation proved sticky, the Bank of Canada made it clear it would be ready to jump back in and raise rates further.
But Orlando said it’s likely content with its decision to sit on the sidelines, given the softer GDP report.
The Bank of Canada is set to make its next interest rate decision on March 8.
The central bank contends a slowdown is necessary to bring inflation back down to its two per cent target.
After peaking at 8.1 per cent in the summer, Canada’s annual inflation rate slowed to 5.9 per cent in January.
The Bank of Canada is forecasting inflation will slow to three per cent by mid-2023 and fall back to the two per cent target next year.
It’s hoping inflation can come back down to target without a sharp economic downturn. At the same time, the central bank has stressed that returning to normal price growth is its primary focus, one that could come at the expense of a more severe economic contraction.
This report by The Canadian Press was first published Feb. 28, 2023.
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets also climbed higher.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
This report by The Canadian Press was first published Sept. 13, 2024.
OTTAWA – Statistics Canada says wholesale sales, excluding petroleum, petroleum products, and other hydrocarbons and excluding oilseed and grain, rose 0.4 per cent to $82.7 billion in July.
The increase came as sales in the miscellaneous subsector gained three per cent to reach $10.5 billion in July, helped by strength in the agriculture supplies industry group, which rose 9.2 per cent.
The food, beverage and tobacco subsector added 1.7 per cent to total $15 billion in July.
The personal and household goods subsector fell 2.5 per cent to $12.1 billion.
In volume terms, overall wholesale sales rose 0.5 per cent in July.
Statistics Canada started including oilseed and grain as well as the petroleum and petroleum products subsector as part of wholesale trade last year, but is excluding the data from monthly analysis until there is enough historical data.
This report by The Canadian Press was first published Sept. 13, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in the base metal and energy sectors, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 172.18 points at 23,383.35.
In New York, the Dow Jones industrial average was down 34.99 points at 40,826.72. The S&P 500 index was up 10.56 points at 5,564.69, while the Nasdaq composite was up 74.84 points at 17,470.37.
The Canadian dollar traded for 73.55 cents US compared with 73.59 cents US on Wednesday.
The October crude oil contract was up $2.00 at US$69.31 per barrel and the October natural gas contract was up five cents at US$2.32 per mmBTU.
The December gold contract was up US$40.00 at US$2,582.40 an ounce and the December copper contract was up six cents at US$4.20 a pound.
This report by The Canadian Press was first published Sept. 12, 2024.
