Canada’s economy expanded at a moderate pace in the third quarter of 2024, with real gross domestic product (GDP) rising by 0.3%, down from the 0.5% growth observed in the first and second quarters. Despite gains in household and government spending, growth was tempered by declining business investments, slowing inventory accumulation, and weakened export performance.
This marked slowdown in economic activity comes as per capita GDP—a crucial indicator of economic well-being—fell by 0.4%, its sixth consecutive quarterly decline, highlighting challenges in improving productivity amidst ongoing global and domestic uncertainties.
Household spending increased by 0.9%, driven primarily by robust purchases of new trucks, vans, and sport utility vehicles. Financial services also saw increased expenditures, partially offsetting declines in the accommodation and food service sectors.
On a per capita basis, household consumption rose slightly, up 0.2%, signaling modest improvements after prolonged weakness over recent quarters.
Government spending also continued its upward trajectory, expanding 1.1% for the third consecutive quarter. All levels of government contributed to this increase, reversing the contraction seen at the close of 2023.
Business investment presented a mixed picture, with an overall decline led by a significant 7.8% drop in machinery and equipment spending. The decrease was pronounced in transportation equipment, coinciding with reduced imports of aircraft and ships.
Non-residential construction was flat, with engineering structure investments offset by reduced non-residential building activities. However, investments in intellectual property, notably in research and development and mineral exploration, rose by 1.4%.
Exports fell for the second consecutive quarter, declining by 0.3% as unwrought gold, passenger vehicles, and travel services led the retreat. Imports also edged lower by 0.1%, further dampening the trade sector’s contribution to growth.
The housing market showed signs of stabilization, with overall investment increasing by 0.8%. Resale activity drove this growth, reflected in a 4.9% rise in ownership transfer costs. However, new construction and renovation spending continued to decline, indicating ongoing softness in foundational segments of the housing sector.
Household finances improved in the third quarter, aided by a 1.7% rise in employee compensation. Wage increases were particularly notable in finance, real estate, and educational services, with collective bargaining agreements in Quebec and Ontario contributing to the gains.
Additionally, the Bank of Canada’s interest rate cuts between June and September reduced borrowing costs, leading to the first decline in mortgage and consumer credit payments since 2021. These factors drove the household saving rate to 7.1%, its highest level in three years.
Corporate earnings fell by 1.1% in the third quarter, with non-financial corporations experiencing a broad-based decline. The motor vehicle industry, among others in the manufacturing and retail sectors, saw significant weaknesses. However, oil and gas production helped offset some losses with growth linked to increased output.
Financial corporations posted modest growth, buoyed by lower interest rates that boosted banking profits. However, extreme weather events, including Hurricane Debby and wildfires in Jasper, led to higher insurance claims, making Q3 the second costliest quarter for insured damages in Canada’s history.
The GDP deflator rose by 0.6%, reflecting higher costs for government and household expenditures. Import prices increased, while export prices fell, further eroding Canada’s terms of trade for the fourth straight quarter.
While Q3 GDP figures point to resilience in certain sectors, the broader economic landscape remains challenging. Persistent declines in per capita GDP, sluggish business investments, and fragile trade performance underline the need for strategic interventions to sustain long-term growth.