2023-12-22 17:07:10
“Canada’s economic engine continued to stall in the fourth quarter,” reacts Royce Mendes, economist at Desjardins Group and head of macroeconomic strategy, in a note to clients.
“As more households and businesses feel the effects of rising interest rates in 2024, we expect Canada to fall into a mild recession at best. So even though the economy is currently experiencing hiccups, it could start to decline early in the new year.”
The federal agency reported that activity in service-producing industries edged up 0.1% in October, while goods-producing industries were unchanged.
Statistics Canada also projects that real gross domestic product (GDP) for November rose 0.1%, led by gains in manufacturing, transportation and warehousing, as well as agriculture, forestry, fishing and hunting, partially offset by a decline in retail trade.
Capital Economics’ Olivia Cross finds the GDP figures were weaker than expected, which would increase the risk of the economy contracting again in the final quarter. “This is another reason to think that the Bank of Canada will soon take the turn towards monetary easing.”
“Overall, quarterly GDP growth will most likely be lower than the Bank of Canada’s forecast of an annualized gain of 0.8%,” she adds.
In October, the manufacturing sector fell by 0.6% and wholesale trade by 0.7%, again according to Statistics Canada. For their part, retail trade grew by 1.2% while mining, quarrying and oil and gas extraction saw a gain of 1%.
Penalizing strikes
The transportation and warehousing sector declined 0.2% in October. The strike at the St. Lawrence Seaway Management Corporation led to a reduction in activity in certain transportation subsectors.
This included a 3.7% contraction in shipping. This is the first drop since the labor dispute at the Port of Vancouver. Truck transportation, for its part, was down 0.9%.
CIBC economist Andrew Grantham said that while supply issues continue to hold back activity due to events like the St. Lawrence Seaway Management Corporation strike and the strike in the automotive sector in the United States, there are also indications of weak demand.
“Weak demand will likely persist as more homeowners refinance their loans at higher interest rates, which will limit overall economic activity and see inflation slow further in 2024, opening the door for a decline rates in the second quarter of next year,” he said in a note.
The activities of real estate brokers decreased by 6.8% in October, the largest monthly decline since April 2022, while, according to Statistics Canada, the majority of Canada’s largest real estate markets continued to slow down.
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