Government spending and business investment drive GDP growth, but exports and construction decline
Statistics Canada reported that real gross domestic product (GDP) increased by 0.5 percent in the second quarter of 2024, following a 0.4 percent rise in the first quarter.
This growth was driven by higher government final consumption expenditures, increased business investment in engineering structures, machinery and equipment, and household spending on services.
However, declines in exports, residential construction, and household spending on goods moderated this growth. On a per capita basis, GDP fell by 0.1 percent, marking the fifth consecutive quarterly decline.
Government spending rose 1.5 percent in the second quarter, fuelled by increases in employee compensation and hours worked across all levels of government. This spending also saw a rebound in purchases of goods and services by federal, provincial, and territorial governments.
Business investment in machinery and equipment increased by 6.5 percent, led by higher spending on aircraft and other transportation equipment and parts. Investment in non-residential structures grew by 0.5 percent, primarily in the oil and gas sector.
Meanwhile, household spending growth slowed to 0.2 percent, with higher expenditures on housing, food, and electricity being offset by fewer purchases of new vehicles and reduced spending by Canadians abroad.
The export of goods and services declined by 0.4 percent in the second quarter after a 0.5 percent increase in the first quarter. Imports also edged down by 0.1 percent, driven by lower imports of industrial machinery and commercial services.
Housing investment continued its decline, falling by 1.9 percent, marking the largest decrease since the first quarter of 2023. This was due to reduced investment in new construction, particularly in Ontario, as well as declines in renovations and ownership transfer costs.
The GDP deflator rose by 1.1 percent, driven by higher prices for household consumption of services.
In June 2024, real GDP remained essentially unchanged, following a 0.1 percent increase in May. Goods-producing industries experienced a 0.4 percent decrease, the largest since December 2023, due to declines in manufacturing and construction.
The manufacturing sector contracted by 1.5 percent, offsetting growth from the previous two months. Durable goods manufacturing saw a 2.4 percent drop, its largest since April 2021, while non-durable goods manufacturing declined by 0.3 percent.
Wholesale trade fell for the second consecutive month in June, with significant declines in machinery, equipment, and motor vehicles.
The construction sector contracted by 0.6 percent, marking its third consecutive month of decline, with residential building construction being the only subsector to record an increase.
The utilities sector, on the other hand, posted a 2.3 percent increase, its second consecutive monthly rise, driven by growth in electricity generation and natural gas distribution.
Transportation and warehousing contracted by 0.3 percent in June, with air transportation contributing significantly to the decline due to a strike by pilots at a major Canadian air carrier.
The real estate and rental and leasing sector expanded by 0.3 percent, driven by higher home sales, particularly in Ontario and Quebec. The finance and insurance sector posted its third consecutive monthly increase, rising by 0.5 percent in June.
Advance information indicates that real GDP by industry was essentially unchanged in July 2024. Decreases in construction, mining, quarrying, and oil and gas extraction, as well as wholesale trade, were offset by increases in finance, insurance, and retail trade.
Corporate incomes rebounded in the second quarter, with total corporate incomes rising by 3.1 percent after a 5.6 percent decline in the first quarter. Non-financial corporations saw a 3.1 percent increase, with gains in the oil and gas sector, while financial corporations’ surplus rose by 2.9 percent.
The household savings rate also increased to 7.2 percent, driven by gains in disposable income outpacing nominal consumption expenditure. The Bank of Canada’s recent policy rate cuts in June and July have had a mixed impact on mortgage borrowers, with many still facing higher renewal costs.
Real GDP by industry grew by 0.5 percent in the second quarter of 2024, with both goods-producing and services-producing industries contributing to the growth.
The public sector, comprising educational services, health care and social assistance, and public administration, was the largest contributor to growth for the second consecutive quarter.
Mining, quarrying, and oil and gas extraction posted its largest quarterly increase since the second quarter of 2022, while the construction and manufacturing sectors continued to dampen growth.
The transportation and warehousing sector expanded for the ninth consecutive quarter, with significant contributions from urban transit systems and pipeline transportation. The finance and insurance sector also posted its highest quarterly growth rate since the third quarter of 2021.
