Real gross domestic product (GDP) increased 0.5% in the second quarter after rising 0.4% in the first quarter. Higher government final consumption expenditures, business investment in engineering structures and machinery and equipment, and household spending on services in the second quarter were moderated by declines in exports, residential construction and household spending on goods, reported Statistics Canada on Friday.
On a per capita basis, GDP fell 0.1% in the second quarter – the fifth consecutive quarterly decline, said the federal agency.
Real gross domestic product and final domestic demand
Contributions to percentage change in real gross domestic product, second quarter of 2024
“Government expenditures rose 1.5% in the second quarter, as there were increases in compensation of employees, which is an expense for governments, and hours worked across all levels of government. Purchases of goods and services in the federal as well as in provincial and territorial governments also rebounded in the second quarter from a decline in the first quarter,” said StatsCan.
“Business spending on machinery and equipment increased 6.5% in the second quarter, led by higher spending on aircraft and other transportation equipment and parts. This coincided with increased imports of aircraft and ships. Business investment in non-residential structures increased 0.5% in the second quarter due to higher spending on engineering structures, primarily in the oil and gas sector. Business investment in non-residential building construction fell 1.2%, as investment in commercial and industrial structures declined. Business spending on intellectual property products edged up 0.3% in the second quarter, mainly due to increased spending on mineral exploration and evaluation (+4.5%).
“Growth in household spending slowed to 0.2% in the second quarter after rising 0.9% in the first quarter. Higher expenditures for rental fees for housing, food and electricity led the increase in the second quarter. Meanwhile, fewer purchases of new trucks, vans and sport utility vehicles as well as reduced expenditures by Canadians abroad tempered overall growth.
“Population growth outpaced the increase in household spending in the second quarter, and, as a result, per capita household expenditures fell 0.4% after rising 0.3% in the first quarter.”
Compensation of employees, quarter-to-quarter % change, seasonally adjusted data
James Orlando, Director of Economics at TD Bank, said Canadian economic growth surprised higher in 2024 Q2.
“While the headline print was encouraging, the details were less so. Most of the growth surprise was driven by government spending and aircraft purchases, which should come back down to earth in the Q3 data. Made worse is that the engine of Canadian growth – the consumer – has slowed the pace of spending in the face of still high rates. Combine this with the fact that momentum stumbled in June and July, and the outlook for the remainder of the year has become less rosy,” he said.
“The Bank of Canada is scheduled to meet next week and another cut seems like a forgone conclusion. Importantly, markets have solidified around a 25 basis point per meeting pace through the rest of this year, which would bring the policy rate to 3.75% by December 2024. While this will provide some relief to consumers and businesses, we don’t expect a meaningful acceleration in economic growth until late 2025 – when rates finally start moving closer to our target of 2.5%.”
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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