financialpost Chapter 19

Overview

• Topic: Economic Growth in Canada

• Article Type: Economic Update

• Author: Jordan Gowling

• Published: Dec 23, 2024

• Summary: Canada's economy shows unexpected growth but faces signs of potential decline.

Economic Growth Details

• Recent Performance

  • Canada's economy expanded more than expected in October 2024.

  • October's GDP growth: 0.3%; surpassed economists' forecast of 0.2%.

  • 10 out of 12 sectors in the economy reported growth during this period.

• Driving Sectors

  • Primary contributors to growth include:

    • Mining, Quarrying, Oil, and Gas Extraction: Significant rise.

    • Oil and Gas Extraction: Growth of 3.1% in October.

    • Manufacturing: Increased by 0.3% due to non-durable goods sales recovery.

    • Real Estate and Rental Leasing: Rose by 0.5%, indicating increased home sales, especially in Toronto and Vancouver.

Potential Slowdown

• Future Projections

  • November's early estimate predicts a contraction of 0.1% in GDP, marking the first decline this year.

  • Economists are cautioning about a possible slowdown in overall economic momentum.

• Bank of Canada's Position

  • Governor Tiff Macklem expressed the need for stronger growth after previous rate cuts.

  • Recent central bank policy rate: 3.25%, marking the top of its neutral range.

  • A more gradual approach to interest rates is planned for the new year.

Sectoral Insights

• Specific Sectors Noted

  • Mining and Quarrying: Notable growth attributed to commodities like copper, nickel, lead, and zinc.

  • Real Estate: Strong recent performance indicated by rising construction activity.

  • Wholesale Trade: Increased by 0.5% as more transactions take place.

  • Motor Vehicle Sales: Significant uptick of 3.3% in sales figures due to demand.

Economic Forecasts

• Future Economic Health

  • Despite the contraction in November, the fourth quarter is expected to grow at 1.7%.

  • Growth forecast among economists remains below the 2% goal set by the Bank of Canada.

  • Additional rate cuts may be necessary to stimulate further growth in the economy post-2024.

  • Analysts expect a possible dip to 2.25% overnight rates in 2025.

Conclusion

• Economic Context: While October saw optimistic growth, analysts highlight emerging risks that may affect recovery. Continuous monitoring of sector performance and macroeconomic indicators will be vital.