Canada’s economy exhibited moderate growth in the final quarter of 2024, as real Gross Domestic Product (GDP) increased by 0.6%. This rise follows a 0.5% expansion in the third quarter, demonstrating a steady, albeit slow, recovery in the nation’s economic activity.
In terms of real GDP per capita, the increase was more modest, registering just a 0.2% rise in the fourth quarter, recovering from a 0.1% decrease in the previous quarter. However, the broader trend for 2024 was less optimistic. The GDP per capita saw a decline of 1.4% over the year, marking a continuation of the negative trajectory observed in 2023.
Household spending in Canada surged by 1.4% in the fourth quarter, the largest quarterly increase since mid-2022. The primary driver of this surge was a significant rise in the purchase of new trucks, vans, and sport utility vehicles (SUVs), alongside increased spending in the financial services and telecommunications sectors. This uptick in household expenditures marks a recovery from a sluggish period, with the full-year increase in household spending for 2024 reaching 2.4%. Notably, the increase in household consumption in 2024 was driven by both goods (up 1.6%) and services (up 3.0%).
Despite the growth in the fourth quarter, the per capita expenditure on goods and services was less impressive, falling by 0.6% for the year. On a regional scale, consumer spending varied significantly, with imports from the United States continuing to play a critical role in household consumption patterns. Nearly 13% of Canada’s total household final consumption expenditures in 2021 were linked to U.S. imports, like vehicles, recreational equipment, and telecommunications gear.
Residential construction saw a significant boost in the fourth quarter of 2024, rising by 3.9%, the fastest growth in over a year. This increase was primarily driven by ownership transfer costs, which rose by 12.5%, reflecting a strong resale market. New residential construction also experienced moderate growth, particularly in Ontario, which saw an increase in single-home building. However, the overall trend for residential construction in 2024 was negative, with a decrease of 1.1%, following a sharp 8.5% decline in 2023.
Business investment also saw a positive shift in the fourth quarter, rising by 0.7%, largely due to an increase in building construction. Investment in machinery and equipment saw a notable 4.2% jump, led by higher spending in industrial machinery, aircraft, and transportation equipment. However, the full-year picture for 2024 revealed a different story. Investment in non-residential structures dropped by 1.8%, and investment in machinery and equipment fell by 2.1%, signaling a broader slowdown in business investment compared to previous years.
The trade balance showed a mixed performance. Exports of goods and services rose by 1.8% in the fourth quarter, rebounding from a 0.2% decline in the third quarter. Key contributors to this growth included higher exports of unwrought metals, crude oil, and vehicles. On the other hand, imports grew at a slower pace, up by 1.3%, driven by increased imports of metal ores, pharmaceuticals, and transportation equipment. The terms of trade improved slightly by 0.1%, as higher Canadian energy product prices outpaced rising import costs.
However, on an annual basis, Canada’s exports and imports grew at an identical pace of 0.6%, with crude oil and bitumen leading the export gains, while travel services and clothing products dominated imports. The country’s terms of trade for the year saw a decline of 1.0%, driven by higher import prices which outpaced the growth in export prices.
In the corporate sector, operating incomes rebounded by 4.6% in the fourth quarter, following a 0.5% dip in the third quarter. The manufacturing and wholesale sectors saw notable growth, particularly in motor vehicles and construction-related industries. Conversely, the financial sector saw only modest growth of 0.2%, as banks and insurers grappled with rising operational costs, and the insurance industry was burdened by significant weather-related claims in 2024.
In terms of wages, growth in employee compensation slowed significantly. While compensation rose by 1.0% in the fourth quarter, it was a marked deceleration from the 1.7% increase observed in the previous quarter. Across provinces, compensation growth varied, with Nunavut and the Northwest Territories recording the highest increases at 2.9%, while British Columbia, Manitoba, and Prince Edward Island saw much more modest gains. Overall, annual wage growth in 2024 slowed to 5.9%, the lowest increase since the pandemic-induced downturn of 2020.
Household savings showed a significant slowdown, with the household saving rate declining from 7.3% in the third quarter to 6.1% in the fourth quarter. This decline was mainly due to household expenditures rising faster than disposable income, which grew by only 1.1%. Although savings were down, the household saving rate for 2024 remained relatively high at 6.1%, compared to the 3.7% recorded in 2023.
Meanwhile, household investment earnings took a hit, declining by 1.8% in the fourth quarter, the first decrease since 2020. The reduction in earnings was attributed to lower interest rates, which had a direct impact on the returns from investments. Property income payments, including mortgage interest, also fell by 3.1%, marking the largest drop in over two years.