Statistics Canada revises GDP growth upward, highlighting resilience and increased business investment
Canada's economy experienced stronger growth than initially estimated over the last three years, as per annual revisions from Statistics Canada.
According to BNN Bloomberg, revised data shows that Canada’s real gross domestic product (GDP) grew by 1.5 percent in 2023, up from the earlier estimate of 1.2 percent.
Additionally, 2022 growth was revised to 4.2 percent from 3.8 percent, while the growth rate in 2021 was recalculated to 6 percent from 5.3 percent. These changes highlight a more resilient Canadian economy during a period of aggressive interest rate hikes by the Bank of Canada.
Statistics Canada notes that the 2023 upward GDP revision was partly due to stronger business investment, which may indicate higher potential for future growth.
In particular, investment in non-residential sectors, including machinery and equipment, was revised from a 0.8 percent contraction to a 1 percent increase. The year 2022 also saw an upward revision in non-residential investment growth, adjusted to 6.4 percent from the previous 4 percent.
A breakdown by province reveals varied economic performance across Canada. British Columbia, Saskatchewan, and Alberta each recorded some of the largest GDP increases in 2023, with growth rates of 2.4 percent, 2.3 percent, and 2.3 percent, respectively.
In contrast, Newfoundland and Labrador saw a decline of 2.6 percent, according to Statistics Canada. Additionally, GDP expanded in nine provinces and two territories, with Nunavut recording the highest growth among territories at 3.8 percent.
Statistics Canada attributes some of this growth to exports, as Canada’s exports of goods and services rose by 5 percent in 2023, outpacing a 0.3 percent increase in imports.
Household spending, although rising in 2023, slowed from the previous year’s pace. According to Statistics Canada, household spending grew by 1.8 percent in 2023, led by a 2.7 percent increase in spending on services, while spending on goods rose by 0.7 percent.
Newfoundland and Labrador and Alberta recorded the highest household spending growth rates, at 3.8 percent and 3.3 percent, respectively.
However, Statistics Canada noted that population growth exceeded household spending increases in every province and territory, with the exception of Newfoundland and Labrador and Nunavut.
Government spending also saw upward revisions. Statistics Canada revised general government final consumption expenditure in 2023 to a 2.2 percent increase, up from 1.6 percent.
While provincial, territorial, and local governments increased their expenditures, federal government spending declined.
The revised figures show that government spending grew in all provinces and territories except for Quebec and Yukon, where government final consumption expenditure declined by 1.7 percent and 1.6 percent, respectively.
However, investment in housing continued to struggle. Statistics Canada reported that housing investment fell by 8.5 percent in 2023, following a 10.6 percent decline in 2022.
This decline was observed across new construction, home renovations, and ownership transfer costs, with Newfoundland and Labrador, Prince Edward Island, and Quebec experiencing some of the steepest drops. Nunavut was the only region that saw an increase in housing investment in 2023.
Investment in business structures and software was more positive.
In 2023, business investment in non-residential structures rose by 3.2 percent, driven by spending in sectors such as mining, utilities, and oil and gas, particularly in Nunavut, the Northwest Territories, Newfoundland and Labrador, and Saskatchewan.
Business investment in intellectual property products also saw growth, rising 4 percent due to higher expenditures on software, which more than offset declines in spending on mineral exploration and research and development.
Ontario led the increase in business software investment, as reported by Statistics Canada.
Nominal GDP growth slowed considerably in 2023, rising only 2.9 percent compared to 12.4 percent in 2022 and 14.2 percent in 2021.
Statistics Canada observed a similar trend across most provinces and territories, except for Nunavut, where nominal GDP growth reached 11.7 percent. The drop in nominal GDP growth reflects cooling from the substantial post-pandemic rebounds of the previous two years.
Meanwhile, employee compensation continued to increase across all provinces and territories, marking the third consecutive annual rise since the COVID-19-related decline in 2020.
Nationally, wages and salaries grew by 6.5 percent in 2023, with the strongest growth observed in Yukon (9.9 percent), Nova Scotia (9.4 percent), and Prince Edward Island (9.4 percent).
Quebec, the Northwest Territories, and Nunavut reported the lowest wage increases, ranging around 5.2 percent to 5.3 percent.
According to Statistics Canada, gross operating surplus declined by 5.9 percent in 2023, following significant growth in the previous two years. This decline was primarily due to lower energy and natural resource prices, which fell from two-year highs.
Newfoundland and Labrador and Alberta saw the steepest drops in operating surplus, experiencing declines of 21.1 percent and 16 percent, respectively. However, growth in Quebec (4.3 percent) and Ontario (0.9 percent), largely in service industries, helped to mitigate the national decline.
Household saving rates and debt service burdens also shifted. Statistics Canada reported a decrease in the household saving rate to 3.7 percent in 2023 from 4 percent in 2022.
Meanwhile, the cost of household borrowing rose sharply due to interest rate hikes, with total interest payments on debt increasing by 42.5 percent.
Consequently, the interest-only debt service ratio climbed to 9.1 percent in 2023, the highest since 1995. Debt service burdens were highest in Ontario and British Columbia, both surpassing 10 percent.
