Real gross domestic product (GDP) increased 0.3% in the third quarter, after rising 0.5% in both the second and first quarters. The contributions to GDP growth from higher household and government spending were moderated by slower non-farm inventory accumulation, lower business capital investment and lower exports, reported Statistics Canada on Friday.
On a per capita basis, GDP fell 0.4% in the third quarter, which was the sixth consecutive quarterly decline.
“Household spending rose 0.9% in the third quarter, led by increased spending on new trucks, vans and sport utility vehicles. Higher spending on financial services also contributed to the increase in household expenditures, while spending on accommodation and food services fell,” said the federal agency.
“Per capita household expenditures edged up 0.2% in the third quarter, after falling in six of the last eight quarters.”
The report said government expenditures increased 1.1% in the third quarter, the third consecutive quarterly increase since the decline in the fourth quarter of 2023. Spending across all levels of government increased in the third quarter of 2024.
Photo- Statistics Canada
“Canadian economic growth came in as expected in 2024 Q3. And even though the headline print doesn’t look encouraging, the underlying fundamentals remain strong. The lifeblood of the economy is the Canadian consumer, and they have been carrying the weight over 2024. As interest rates continue to fall alongside a wave of government stimulus over the coming months, we are looking for consumer spending to keep lifting GDP through at least the first half of 2025,” said James Orlando, Senior Economist, TD Economics.
“The Bank of Canada is set to meet in two weeks and debate over a 25 vs a 50 bp cut remains hot. Recall that the BoC cut by 50 bps in October because inflation fell too far below its 2% target while downside risks to the economy were mounting. Since then, inflation has quickly reversed course and there is greater momentum emerging with the Canadian consumer. Jobs data continues to support spending and the real estate market is starting to recoil after being suppressed under high rates. Even though GDP came in below the BoC’s forecast for Q3, the momentum in the economy should be sufficient evidence for the BoC to scale back the pace of cuts come Dec. 11th.”
Nathan Janzen, Assistant Chief Economist, RBC, said some interest rate sensitive sectors (residential investment, consumer spending) showed signs of life in Q3 following the start of BoC interest rate cuts in June.
“But per-capita GDP was still down for a 6th consecutive quarter, and with soft growth momentum extending into monthly estimates into early Q4,”h he said.
“The GDP numbers should help to reinforce that interest rates are higher than they need to be to maintain inflation sustainably at a 2% rate. The BoC will also be watching next week’s labour market data closely, but our own base-case assumption is for another 50 basis point cut to the overnight rate in December.”
Doug Porter, Chief Economist, BMO, said there is no debate that the economy struggled through mid summer and the early fall, weighed on by a variety of labour actions and some weather events.
“However, there are signs in both the quarterly and monthly data that domestic demand is stirring, with BoC rate cuts and some incoming mild tax relief likely to provide additional support for spending. Of course that somewhat sunnier domestic outlook is looking up at the dark cloud of trade uncertainty; for now we are calling for 2.0% annual GDP growth in 2025, assuming the threatened 25% tariffs are not put in place. For the Bank of Canada, we don’t see enough here to push the Bank to cut aggressively again in December—especially in light of the hefty upward revisions, even to this year. We’re still in the 25 bp camp,” he said.
Mario Toneguzzi
Mario Toneguzzi is Managing Editor of Canada’s Podcast. He has more than 40 years of experience as a daily newspaper writer, columnist, and editor. He was named in 2021 as one of the Top 10 Business Journalists in the World by PR News – the only Canadian to make the list. He was also named by RETHINK to its global list of Top Retail Experts 2024.
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