Slower business investment and exports weigh on growth; saving rate hits a three-year high
Statistics Canada reported that Canada’s real gross domestic product (GDP) grew by 0.3 percent in the third quarter of 2024, following consecutive 0.5 percent increases in the first and second quarters.
Growth was supported by higher household and government spending but tempered by slower non-farm inventory accumulation, reduced business investment, and lower exports.
On a per capita basis, GDP declined by 0.4 percent, marking the sixth consecutive quarterly decrease.
Household spending rose by 0.9 percent, driven by purchases of new trucks, vans, and sport utility vehicles, along with increased expenditures on financial services.
However, spending on accommodation and food services fell, moderating the overall increase. Per capita household expenditures edged up 0.2 percent in the third quarter after declining in six of the last eight quarters.
Government expenditures increased by 1.1 percent, marking the third straight quarterly rise since the decline at the end of 2023. Spending increased across all levels of government during the quarter.
Meanwhile, businesses added $18.5bn in non-farm inventories, down significantly from $27.8bn in the second quarter. Reduced inventory accumulation in retail motor vehicles and drawdowns in manufacturing goods were key factors in the slowdown.
Business investment in machinery and equipment contracted by 7.8 percent, led by declines in spending on aircraft and other transportation equipment. Imports of these goods also fell after a notable rise in the previous quarter.
Business spending on intellectual property products increased by 1.4 percent, with growth in research and development and mineral exploration offsetting the declines.
Housing investment grew by 0.8 percent, its first increase since the third quarter of 2023, driven by a 4.9 percent rise in ownership transfer costs reflecting resale activity.
However, spending on new construction and renovations declined. A sharp drop in apartment absorptions in Ontario offset gains in construction of single-family homes and apartments.
Exports fell by 0.3 percent in the third quarter, continuing the decline seen in the previous quarter. Lower exports of unwrought gold, passenger cars, light trucks, and travel services drove the decrease, partially offset by higher crude oil and bitumen exports.
Imports edged down by 0.1 percent, with declines in passenger cars, transportation equipment, and metal ores.
Compensation of employees rose by 1.7 percent during the third quarter, supported by wage increases in finance, real estate, and educational services.
Wage growth in Quebec and Ontario was partly attributed to collective bargaining agreements. Prince Edward Island experienced the largest increase in employee compensation, while Yukon saw a decline coinciding with the closure of a gold mine.
The household saving rate climbed to 7.1 percent, the highest in three years, as disposable income grew by 2.3 percent, outpacing the 1.2 percent increase in spending.
The Bank of Canada’s interest rate cuts during the summer contributed to reduced interest payments on mortgages and consumer credit, easing financial pressures on households.
In September, GDP rose by 0.1 percent after remaining unchanged in August. Services-producing industries expanded by 0.2 percent, marking the fourth consecutive monthly increase. Growth in retail and wholesale trade sectors supported this rise.
Retail trade saw its largest monthly growth since October 2023, driven by increased activity in food, beverage, and gasoline retailing. Meanwhile, goods-producing industries contracted by 0.3 percent, with mining, quarrying, and oil and gas extraction down for the third consecutive month.
The manufacturing sector continued its decline, contracting for the fifth consecutive quarter with a 1.5 percent drop in the third quarter.
Non-durable goods manufacturing recorded its fourth straight monthly decline in September, led by decreases in food and chemical manufacturing. Durable goods manufacturing saw a slight rebound, with gains in transportation equipment offset by declines in machinery and other sectors.
Utilities rose by 1.8 percent in the third quarter, driven by increased electricity demand during an unusually warm summer.
Public sector growth of 0.8 percent also contributed significantly, supported by expansions in education, healthcare, and public administration.
