Exports lift Q4, but underlying concerns remain
Canada's economy continues to experience sluggish growth – especially on a per capita basis – with the Bank of Canada likely to maintain its current stance on interest rates as a result, according to BMO chief economist Doug Porter.
Statistics Canada reported a 1.0% annual growth rate for the Canadian economy in the fourth quarter of 2024, narrowly avoiding a technical recession. This follows a revised 0.5% decline in the previous quarter. Though positive, the growth remains modest, especially considering the over 2% drop in per capita terms.
While January's preliminary reading suggests a promising 0.4% growth, BMO Economics noted how experts remain cautious. This jump is likely temporary considering factors like the return of Quebec public servants and a mild winter.
Net exports and a modest increase in consumer spending were the main contributors to the fourth quarter's growth. However, other sectors like housing, business investment, and even government spending experienced declines.
Read next: Canada's economy continues to grow
The robust US economy also played a significant role in supporting Canadian exports, preventing a downturn. However, domestic demand, the main driver of long-term growth, fell for the first time in a year, primarily due to the weakness in business investment.
Still, the BoC is unlikely to cut interest rates in the near future as per Porter. The lack of significant deterioration in economic conditions combined with ongoing disinflationary pressures suggest the BoC will maintain its wait-and-see approach.
Make sure to get all the latest news to your inbox on Canada’s mortgage and housing markets by signing up for our free daily newsletter here.
