Despite challenges, the economy edges up with exports driving growth and business investment down
Canada's economy experienced a slight uplift in the fourth quarter of 2023, as revealed by Statistics Canada.
The real gross domestic product (GDP) edged up by 0.2 percent, recovering from a 0.1 percent decline in the previous quarter. This growth was primarily driven by an increase in exports and a decrease in imports, although it was tempered by a decrease in business investment.
Here are the key highlights from the report:
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Exports Drive Growth: Exports of goods and services saw a 1.4 percent increase in the fourth quarter, led by a significant 6.2 percent rise in crude oil and crude bitumen exports. This was supported by sustained crude oil production in Alberta, along with increases in travel services and other transportation equipment and parts.
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Imports Decline: Imports of goods and services declined by 0.4 percent in the fourth quarter, following a 0.3 percent rise in the third quarter. The decrease was mainly due to lower imports of intermediate metal products, tires, motor vehicle engines and parts, and passenger cars and light trucks.
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Annual Growth in Exports: For the year 2023, exports of goods and services rose by 5.7 percent, significantly outpacing the 1.0 percent increase in total imports. The growth in exports was primarily led by increased exports of passenger cars and light trucks, as well as travel services.
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Household Spending Increases: Household spending rose by 0.2 percent in the fourth quarter, with new trucks, vans, and utility vehicles driving the increase. This was despite a decline in expenditures by Canadians abroad (-4.8 percent) and an increase in spending by non-residents in Canada (+4.4 percent).
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Housing Investment Declines: Housing investment decreased by 0.4 percent in the fourth quarter, marking a continuation of the trend of decline in six out of the last seven quarters. The decline was offset by increases in new construction (+2.2 percent) and renovations (+0.2 percent), despite a weakened resale market across Canada.
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Business Investment Falls: Real business investment declined, with investment in non-residential structures falling by 3.0 percent due to decreased expenditure on engineering structures. Investment in machinery and equipment also continued its decline, dropping by 1.4 percent.
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Inventories Slowdown Affects GDP: The accumulation of business inventories slowed, adding $30.4bn to their inventories in the fourth quarter, compared with $34.7bn in the third quarter. This slowdown was partly offset by increased manufacturing inventories.
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Terms of Trade Deteriorate: The terms of trade fell by 0.5 percent in the fourth quarter as the price of imports rose by 0.8 percent, outpacing the 0.3 percent increase in export prices. For the year 2023, the terms of trade fell by 5.9 percent.
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Compensation Growth Slows: Compensation of employees rose by 0.8 percent in the fourth quarter of 2023, the slowest pace since the second quarter of 2020. This was attributed to slower wage growth in service-producing industries and declining wages in goods-producing industries.
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Household Saving Rate Stable: The household saving rate remained stable at 6.2 percent in the fourth quarter, as disposable income and spending rose at nearly the same pace. Corporate incomes continued to grow, with a 2.9 percent increase in the fourth quarter, driven by the non-financial sector.
