Canadian Economy

Economy Posts Nice Gain in December but Fourth Quarter Growth Comes in Soft

highlights

• The Canadian economy expanded by 0.3 per cent in December, the strongest monthly gain since March.
• However, it still left fourth quarter annualized growth at just 0.3 per cent and growth for the year at 1.6 per cent.
• The monthly gain was fueled by rebounds in transportation and warehousing and in mining and oil and gas extraction.
• Manufacturing output growth came in at 0.4 per cent in December, though it remained down on a year-over year basis.
• Activity increased in 5 of 11 major manufacturing groupings: gains in chemicals and primary metals were partly offset by losses in plastics and rubber products, motor vehicle and parts, and aerospace.
• The fourth quarter data release shows that the Canadian economy entered 2020 with very little momentum, with the coronavirus and rail blockades further threatening growth prospects.

REAL GDP INCREASES 0.3 PER CENT IN DECEMBER

Canada’s economy expanded by 0.3 per cent in December, up from 0.1 per cent in November. This was the strongest monthly gain since March, and it pushed up year-over-year growth in real GDP to 1.9 per cent.

However, despite the solid monthly GDP print, the fourth quarter data release shows that the Canadian economy entered 2020 with very little momentum. And, with the economy currently grappling with the significant economic impacts of the coronavirus outbreak and rail blockades, the economy risks losing further momentum in the first half of the year.

Annualized real GDP growth came in at a meagre 0.3 per cent in last year’s fourth quarter, down from 1.1 per cent in the third quarter and 3.4 per cent in the second quarter. The economy was held back by weak international trade and private investment performances. Exports tumbled by 5.1 per cent, the second consecutive quarterly decline, although this was partially offset by a 2.5 per cent fall in imports. Declines were recorded in all major categories of private investment—non-residential structures, machinery and equipment, and intellectual property products. On the positive side, household spending increased by a solid 2.0 per cent, while government spending and an accumulation in inventories also contributed to fourth quarter GDP growth.

All told, the Canadian economy expanded by 1.6 per cent in 2019. With the population increasing at a robust pace of 1.4 per cent last year, real GDP per capita growth came in at a paltry 0.1 per cent. In short, little progress was made last year in improving Canadians’ standard of living.