GDP - Canada - September 2024
Paul Young
Experience Senior Financial Planning, Analysis and Reporting SME seeking P/T or F/T job.
Source: Stats Canada
Canadian real GDP rose at a meagre 1.0% annual rate in Q3, landing close to heavily marked-down expectations. Recall that, back in July, the Bank of Canada had initially forecast 2.8% growth in the quarter, but then scaled that back to 1.5% in its October MPR. The monthly results don't point to a fast comeback, as September is now estimated at a mild +0.1% (flash was +0.3%, oops), and October's flash is also pegged at +0.1%. While we suspect the latter is an underestimate, the economy will struggle to pick back up to a 2% pace in Q4—which is where it was in the first half of the year and marks the BoC's latest estimate for the quarter.
While the recent results are somewhat disappointing, the other piece of today's data puzzle was a set of very large upward revisions to past growth. As previously suggested by the provincial GDP data, growth has been revised markedly higher for each of the past three years and modestly higher even for the first half of this year. To quickly recap, 2021 is now 6.0% (was 5.3%), 2022 is 4.2% (3.8%), and 2023 is 1.5% (1.2%). Combined with a two-tenths revision to H1, and the overall level of GDP has been marked up by a hefty 1.5% since the end of 2020. To put that in perspective, that's larger than the BoC's latest estimate of the output gap (at just a bit above 1% of GDP). Because of the firmer starting point, we are lifting our estimate of full-year growth for 2024 to 1.3% (from 1.1% previously), even with the soggy Q3 result.
In the latest quarter, final sales were about as expected at 2.2%, but the breakdown showed surprising strength in consumer spending (3.5%) and surprising weakness in business investment (-11.3%). Net trade was softer than expected, with both exports and imports sagging, somewhat offset by firmer-than-anticipated gains in housing and government consumption. A couple of details worth noting: Corporate profits took a tumble in Q3, dropping at a 41% a.r. and down 24% y/y; at the same time, the personal saving rate rose to a three-year high of 7.1% (from 6.2% in Q2; prior history was revised down). Canada's version of the PCE deflator cooled to a 1.7% a.r. in Q3, although this only shaved the yearly rate to 2.6% y/y.
For September, it was a similar theme of a consumer comeback, with retail trade jumping 1.0% m/m. The weakness was largely in mining/oil/gas, with a modest drop in manufacturing also weighing. Nearly every other sector was higher, with services up 0.2%. The October flash was also on the soft side at +0.1%, but given the breadth of positive data thus far for the month, there's at least 0.1 ppts of upside risk for the final figure next month.
Bottom Line: 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.
Source: 满地可银行
Paul is a former IBM Customer Success Manager who has deployed over 300 data and AI solutions across industries and geographies for the past 8 years. Paul is a Financial Planning, Analysis, and Reporting SME working with data including integration of macro and micro indicators as part of the integrated business planning and reporting cycle.
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