The Canadian economy continues to beat recession fears, posting modest growth in the fourth quarter even as high interest rates weighed on consumers and businesses.
Statistics Canada reported Thursday that real gross domestic product increased by an annualized rate of one per cent, beating economists’ expectations and the Bank of Canada’s forecast for the final three months of 2023.
“We still are living in a world of high interest rates, where Canadians and Canadian businesses are constrained. And as a result, we’re essentially in this slow growth time period right now for as long as interest rates remain high,” said James Orlando, TD’s director of economics.
The increase follows a decline in the third quarter of 0.5 per cent.
Growth in the fourth quarter was driven by a rise in exports, while housing and business investment both fell.
The federal agency says outside of 2020, economic growth in 2023 rose at its slowest pace since 2016.
In December, real GDP was flat as goods-producing industries contracted and Quebec’s public sector workers’ strike weighed on growth.
Bankruptcies and insolvencies shot up in 2023
Business insolvencies jumped 41 per cent in 2023, compared to 2022, as pandemic debt and high interest rates collided. Consumer insolvencies are also up, by 23 per cent.
BMO chief economist Douglas Porter says the economy is “grinding forward” with help from strong U.S. spending trends, which have boosted Canadian exports.
“There’s no debate that growth is nevertheless anemic, especially when cast in per capita terms,” he said in a client note.
Real GDP per capita is down more than two per cent from a year ago, he noted
High interest rates have put a damper on Canadians’ finances as the Bank of Canada holds its key interest rate at five per cent, the highest it’s been since 2001.
Households continue to renew their mortgages at higher rates, which is causing a pullback in consumer spending and a slowdown in sales for businesses.
Thursday’s report says while consumer spending was up for the quarter, it continued to decline on a per capita basis as the country experiences strong population growth.
A preliminary estimate suggests real GDP grew by 0.4 per cent in January.
Orlando says he’s taking that estimate with a grain of salt given the early figures are later revised by the federal agency.
Additionally, internal TD data suggests consumers are pulling back on spending, he said.
Central bank rate decision highly anticipated
The Bank of Canada has signalled that its next move is most likely a rate cut as inflation eases and higher rates dampen economic growth.
Canada’s annual inflation rate ticked down to 2.9 per cent in January amid a broad-based slowdown in price growth.
Most economists expect the central bank to start lowering its key rate around the middle of the year, but a stronger-than-expected economy may reduce the urgency for the central bank to act soon.
“This changes little for the Bank of Canada, as conditions don’t appear to be worsening so there’s no urgency to cut rates,” Porter said. “With growth still well below potential, disinflationary pressure will continue, but it will require ongoing patience.”
The Bank of Canada is set to announce its next interest rate decision on Wednesday.
Inflation dropped to 2.9% in January
Canada’s inflation rate dropped lower than expected in January — to 2.9 per cent from 3.4 per cent in December, but many consumers say they’re still feeling financial pain.
FREDERICTON – New Brunswick‘s finance minister says the province recorded a surplus of $500.8 million for the fiscal year that ended in March.
Ernie Steeves says the amount — more than 10 times higher than the province’s original $40.3-million budget projection for the 2023-24 fiscal year — was largely the result of a strong economy and population growth.
The report of a big surplus comes as the province prepares for an election campaign, which will officially start on Thursday and end with a vote on Oct. 21.
Steeves says growth of the surplus was fed by revenue from the Harmonized Sales Tax and federal money, especially for health-care funding.
Progressive Conservative Premier Blaine Higgs has promised to reduce the HST by two percentage points to 13 per cent if the party is elected to govern next month.
Meanwhile, the province’s net debt, according to the audited consolidated financial statements, has dropped from $12.3 billion in 2022-23 to $11.8 billion in the most recent fiscal year.
Liberal critic René Legacy says having a stronger balance sheet does not eliminate issues in health care, housing and education.
This report by The Canadian Press was first published Sept. 16, 2024.
OTTAWA – Finance Minister Chrystia Freeland says the government is making some changes to mortgage rules to help more Canadians to purchase their first home.
She says the changes will come into force in December and better reflect the housing market.
The price cap for insured mortgages will be boosted for the first time since 2012, moving to $1.5 million from $1 million, to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
On Aug. 1 eligibility for the 30-year amortization was changed to include first-time buyers purchasing a newly-built home.
Justice Minister Arif Virani is also releasing drafts for a bill of rights for renters as well as one for homebuyers, both of which the government promised five months ago.
Virani says the government intends to work with provinces to prevent practices like renovictions, where landowners evict tenants and make minimal renovations and then seek higher rents.
The government touts today’s announced measures as the “boldest mortgage reforms in decades,” and it comes after a year of criticism over high housing costs.
The Liberals have been slumping in the polls for months, including among younger adults who say not being able to afford a house is one of their key concerns.
This report by The Canadian Press was first published Sept. 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales rose 1.4 per cent to $71 billion in July, helped by higher sales in the petroleum and coal and chemical product subsectors.
The increase followed a 1.7 per cent decrease in June.
The agency says sales in the petroleum and coal product subsector gained 6.7 per cent to total $8.6 billion in July as most refineries sold more, helped by higher prices and demand.
Chemical product sales rose 5.3 per cent to $5.6 billion in July, boosted by increased sales of pharmaceutical and medicine products.
Sales of wood products fell 4.8 per cent for the month to $2.9 billion, the lowest level since May 2023.
In constant dollar terms, overall manufacturing sales rose 0.9 per cent in July.
This report by The Canadian Press was first published Sept. 16, 2024.
