Canada’s economy experienced stagnation in October, as the strength of retail sales was offset by weak manufacturing and a decline in wholesale trade. However, there are signs of improvement in recent data.
Gross Domestic Product (GDP) Figures
According to Statistics Canada, the country’s GDP remained essentially unchanged at 2.208 trillion Canadian dollars ($1.662 trillion) in October compared to the previous month. On a year-on-year basis, the economy expanded by 0.9%. This marks the third consecutive month of flat activity for the economy, following a contraction in the third quarter. October’s performance fell short of economists’ expectations of 0.2% growth, as indicated by the data agency’s flash estimate.
Statistics Canada’s preliminary data suggests a modest growth of 0.1% for the economy in November. This growth is driven by increases in manufacturing, transportation and warehousing, as well as agriculture, forestry, fishing, and hunting. However, retail trade experienced a decline during this period.
Bank of Canada’s Outlook
The Bank of Canada expects near-zero growth in the near term as the economy adjusts to aggressive rate-raising measures. In an effort to address inflation that remains elevated in certain segments, the bank has raised its benchmark policy rate to a level not seen in over two decades.
The steady GDP for October reflects little change in activity for Canada’s goods-producing industries overall. However, services industries experienced a slight increase in activity.
These recent figures indicate a lackluster end to the year for Canada’s economy. While there are signs of improvement, challenges in manufacturing and retail trade continue to hinder overall growth. The Bank of Canada’s ongoing adjustments to its rate policy will play a crucial role in shaping the economic outlook for the country.
Manufacturing and Wholesale Trade Decline in Canada
In October, manufacturing in Canada experienced a decline for the fourth time in five months, contracting by 0.6%. This decrease was primarily driven by a fall in machinery and transportation-equipment manufacturing. Similarly, wholesale trade shrank by 0.7%, marking a second consecutive monthly decline due to broad weakness.
The transportation and warehousing sector also softened during the month. This was affected by a strike by workers on the St. Lawrence Seaway trade route, resulting in a contraction in water transport for the first time since July’s strike by workers at ports on Canada’s west coast.
However, there was some positive news in the retail trade sector, which grew by 1.2% in October. This was the strongest increase since January and was bolstered by activity at clothing and accessories stores after two consecutive months of weakness. Additionally, mining, quarrying, and oil and gas extraction saw a strengthening trend, recovering from declines seen in the previous two months.
The Canadian GDP, measured by expenditure, fell in the third quarter as a result of a decline in international exports and a slower buildup in business inventories. Tiff Macklem, the governor of the Bank of Canada, has warned about the possibility of a weak start to 2024, projected to be a year of transition, with growth expected to be below 1% as consumers and businesses scale back spending. The central bank has maintained its benchmark interest rate at 5% during its last three policy meetings.
The housing market in Canada, despite an earlier recovery during the year, weakened in recent months. Retail spending, which saw a rise in October, is estimated to have flattened last month according to Statistics Canada’s advance data. However, there is some positive news on the horizon as factory shipments and wholesale trade rebounded in November after experiencing declines the previous month.