Economic growth in the final quarter of the year is expected to be on par with the third quarter’s 2.1%, but it is also likely to herald the start of a slower trend that could continue through the first half of this year.
Fourth quarter growth is expected to have been 2.1%, according to Dow Jones. But there’s a wide range of forecasts for the first reading — from 1.4% at JPMorgan to 2.5% by Amherst Pierpont.
Markets turn their focus to gross domestic product data, expected at 8:30 a.m. ET Thursday, after the Federal Reserve’s meeting on Wednesday provided little new insight into Fed rate policy. The Fed did make it clear that it sees a more moderate consumer, which should show up in the softer consumption number in GDP.
On Wednesday, the Commerce Department reported that the U.S. goods trade deficit rose sharply in December as imports rebounded and businesses were more wary about accumulating inventory. The goods trade gap, which has fallen for three straight months due to declining imports, surged 8.5% to $68.3 billion last month.
That prompted some economists to trim fourth quarter growth forecasts. Goldman Sachs economists, for instance, sliced their forecast for growth by one tenth to 1.8%.
“The trade war between China and the U.S. is over for now, but the trade deficit red ink remains, which makes markets scratch their heads and wonder what that was all about,” notes Chris Rupkey, chief economist at MUFG Union Bank.
Rupkey said the surprise jump in the trade gap now has made it a toss up for whether growth will be above or below 2%.
“The trade deficit is still there. The trade deal didn’t fix,” said Diane Swonk, chief economist at Grant Thornton. Swonk expects fourth quarter growth at about 1.7% and said the economy is sliding into a softer period for a number of reasons.
“It’s exacerbated by the cuts at Boeing, a slower consumer and persistently weak business investment,” she said. “We ended on a weak note at the end of the year and that’s going to show up in the data.” The Boeing cuts in production should not have an impact on GDP until the first quarter.
The wide range of forecasts for fourth quarter GDP growth could make for some market volatility around the official reading when it is released Thursday. The median forecast for Q4 GDP growth is also 2.1% in the CNBC/Moody’s Analytics Rapid Update survey of economists.
Jonathan Millar, U.S. economist at Barclays, expects 2% growth, and he says one of the issues forecasters are facing is the impact of volatile oil prices, which rose through most of the fourth quarter.
“One thing to keep an eye on is inventories. Inventory data can be complicated at times when oil prices are moving around a lot. It’s an accounting thing, when there’s a change in the valuation of inventories,” he said. “The book values reported by firms may understate the amount inventories are going up. The stuff that’s flowing in costs more than the stuff that’s flowing out. That distorts the numbers.”
Rupkey noted the $5.3 billion widening in the December goods deficit occurred as imports of industrial supplies rose $3.8 billion to $44.6 billion. He said that industrial supplies includes includes petroleum and petroleum products, and “petro-imports may sink back with the price of crude oil in the coming months.”
Millar said he expects to see a downturn in first quarter growth to a pace of 1.5%, based on Boeing’s production cuts following troubles with the Boeing 737 Max. Boeing and the ripple effect to other businesses will knock an estimated half percentage point off of growth in the first quarter. It’s also unclear what if any impact the coronavirus might have on global growth in the first quarter.
The second quarter should be slightly better at 2%, but then third quarter could spring back once Boeing is back on line, at 2.5%, he said.
As for the fourth quarter, the consumer pulled back, even though it was holiday shopping season. “You had consumer spending at 3.2% in Q3. I have consumers spending slowing in Q4, growing at about 2.8%,” said Ward McCarthy, chief financial economist at Jefferies.
Fourth quarter growth is in line with the third quarter, and also the second quarter, of 2%, but off from the first quarter’s 3.1%.
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.
