Increased household spending on services drives Canadian GDP growth in Q1, despite slower inventory accumulations
According to Statistics Canada, real gross domestic product (GDP) increased 0.4 percent in the first quarter, after no change in the fourth quarter of 2023, revised down from 0.2 percent.
Higher household spending on services was the main contributor to the GDP increase, while slower inventory accumulations moderated overall growth.
Household spending rose by 0.7 percent, mainly due to a 1.1 percent rise in spending on services such as telecommunications, rent, and air transport. Lower spending by non-residents in Canada also contributed to the increase in overall household expenditures.
Household spending on goods edged up 0.3 percent, with higher expenditures on new trucks, vans, and sport utility vehicles.
On a per capita basis, household final consumption expenditures edged up 0.1 percent, following three quarters of declines. Per capita spending on services increased by 0.5 percent, while per capita spending on goods fell for the tenth consecutive quarter.
Exports of goods and services rose 0.5 percent in the first quarter, following a 0.8 percent increase in the fourth quarter of 2023. The leading contributor to the increase was exports of unwrought gold, silver, and platinum group metals, which rose on higher exports to the United Kingdom and Switzerland.
Lower exports of passenger cars and light trucks, as well as crude oil and bitumen, moderated the overall increase.
Imports of goods and services edged up 0.4 percent in the first quarter, following a 0.2 percent increase in the fourth quarter of 2023. Higher imports of clothing, footwear, and textile products led the increase, followed by waste and scrap of metal and glass, as well as electricity.
These gains were partially offset by declines in imports of passenger cars and light trucks amid lower global production.
The terms of trade—the ratio of the price of exports to the price of imports—fell 1.2 percent in the first quarter. The terms of trade have fallen in six of the last seven quarters.
Business capital investment rose 0.8 percent in the first quarter, driven by increased spending on engineering structures, primarily within the oil and gas sector.
Business investment in machinery and equipment increased by 1.6 percent, coinciding with increased imports of industrial machinery, equipment, and parts.
Housing investment edged up 0.3 percent, as ownership transfer costs, representing resale activity, rose 7.1 percent. Ontario, British Columbia, and Quebec recorded the largest volume increases in resales, while prices in these provinces fell in the first quarter.
New housing construction was little changed, with only double houses seeing an increase in work put in place. Costs related to new construction, such as taxes and closing fees upon change in ownership, rose, mainly due to newly absorbed apartment units in Ontario.
Businesses continued to add to their non-farm inventories in the first quarter, but at a slower pace compared to the fourth quarter of 2023. Retail motor vehicles recorded the largest deceleration in inventory accumulation.
The GDP deflator declined 0.3 percent in the first quarter, as export prices fell by 1.3 percent. Prices for household final consumption rose 0.5 percent, the smallest increase since the second quarter of 2020.
Compensation of employees rose 1.5 percent in the first quarter, after growing 0.9 percent in the fourth quarter of 2023. The increase was partly due to services-producing industries, which rose 1.8 percent. The goods-producing industries grew by 0.7 percent, following a 0.4 percent contraction in the previous quarter.
Total wages and salaries in educational services rose 5.9 percent, driven by Quebec, where there was strike action in the previous quarter. Wages and salaries in professional and personal services industries and trade were other major contributors to wage growth.
Wages and salaries in federal government public administration fell by 6.4 percent, following an 11.8 percent rise in the previous quarter due to significant retroactive payments from new collective agreements.
The household savings rate reached 6.9 percent in the first quarter, the highest rate since the first quarter of 2022. Income gains from wages and net investment income outpaced increases in nominal consumption expenditure.
Corporate incomes fell 4.9 percent in the first quarter, after rising 2.4 percent in the fourth quarter of 2023.
The decline in the gross operating surplus of non-financial corporations was fuelled by decreases in the oil and gas sector. The gross operating surplus of financial corporations edged up 0.3 percent, entirely attributable to charter banks.
