GDP Flat for Third Straight Month in October As Economy Continued to Sputter

Statistics Canada says the economy flatlined once again, with GDP showing no growth in October for the third straight month. “Canada’s economic engine continued to sputter in the fourth quarter,” said Royce Mendes, Desjardins managing director and head of macro strategy, in a note to clients.

“As more households and businesses feel the impacts of higher interest rates in 2024, we expect Canada to fall into at least a mild recession. So while the economy is sputtering now, it might begin rolling backwards early in the new year.”

StatCan reported services-producing industries edged 0.1% higher in October, while goods-producing industries were unchanged.

It also forecasted that real gross domestic product for November increased 0.1%, with estimated gains in manufacturing, transportation and warehousing, and agriculture, forestry, fishing and hunting partially offset by decreases in retail trade.

Olivia Cross of Capital Economics said the GDP figures were weaker than anticipated, raising the risk that the economy contracted again last quarter “and are another reason to think that the Bank of Canada will soon pivot to interest rate cuts. The big picture is that quarterly GDP growth is very likely to undershoot the Bank of Canada’s forecasts for a 0.8% annualized gain,” she said in a note.

StatCan said that for October, the manufacturing sector declined 0.6% and wholesale trade contracted 0.7%, while retail trade grew 1.2% and mining, quarrying and oil and gas extraction saw a 1% gain.

It said the transportation and warehousing sector declined 0.2% in October as the St. Lawrence Seaway strike decreased activity in some transportation subsectors. That included a 3.7% contraction in water transportation, which was down for the first time since the B.C. port strike in July, while trucking transportation was down 0.9% as many trucks poised to carry grain were sidelined during the work stoppage.

CIBC economist Andrew Grantham said while supply issues continue to restrain activity due to events such as the St. Lawrence Seaway strike and the U.S. auto strike, there is also evidence of weak demand. “Softness in demand will likely persist as more homeowners refinance at higher interest rates, keeping a lid on overall economic activity and seeing inflation decelerate further in 2024, opening the door for a rate cut in Q2 next year,” he said in a note.

Real estate agent and broker activities were down 6.8% in October, the largest monthly decrease since April 2022, as StatCan says a majority of Canada’s largest housing markets continued to cool off.

Canada’s annual inflation rate held steady at 3.1% in November, above the central bank’s 2% target. The bank expects inflation to cool to 2.5% by the end of 2024 and returning to the 2% target by the end of 2025.

Source: The Star
Source: Financial Post
Source: Globe and Mail
Source: Statistics Canada


Canadian Retail Sales up 0.7% in October, Seen Flat in November

Canadian month-on-month retail sales grew by 0.7% in October, but most likely were flat in November, reinforcing market expectations of sluggish fourth-quarter growth, Statistics Canada data showed.

October sales hit $66.95-billion, led by increases at motor vehicle and parts dealers. Sales were up in seven of nine subsectors, representing 84.1 per cent of retail trade. Furniture, electronics and appliances retailers increased sales by 1.3%, while building material and garden equipment and supplies dealers saw a decline of 0.2%

In volume terms, retail sales increased 1.4%. November sales were likely unchanged, the agency said in a flash estimate.

“Our tracking for fourth quarter GDP now suggests virtually no growth during the period, which is all the more disappointing given surging population growth,” said Desjardins Group economist Tiago Figueiredo.

Bank of Canada Governor Tiff Macklem, citing the effect of higher interest rates, said last week economic growth stalled in mid-2023 and would remain weak into 2024. The bank is due to release updated forecasts in January.

Stephen Brown, deputy chief North America economist at Capital Economics, noted inventories-to-sales ratios were elevated and said there was a big risk that a draw-down would keep GDP growth weak, even if it was marginally positive.

Source: Globe and Mail
Source: The Star
Source: Financial Post
Source: Statistics Canada