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Economic News

Canada: Up on the Rooftop, October GDP Climbs

December 23, 2024
LJ Valencia
Economic Analyst

Highlights

  • Canadian real GDP grew by 0.3% in October 2024, following a 0.2% growth in the prior month. This was a tick above the consensus of economic forecasters and two ticks above the Statistics Canada flash estimate. Twelve of 20 subsectors posted increases. See Table 1 for further details.
  • Notably, September real GDP growth was revised up by almost 0.2%, thanks to meaningful upward revisions in wholesale trade and throughout the goods-producing sectors.
  • The flash estimate points to a real GDP decline of 0.1% in November (graph 1). Assuming growth is flat in December, this would imply a 1.7% annualized gain in real GDP by industry in the fourth quarter of 2024 and is in line with the low end of our tracking range. 

Implications

October 2024’s roaring headline real GDP growth reflected strength driven mainly by goods-producing sectors. Under the hood, the economy saw gains in resource extraction, manufacturing, construction and wholesale trade. Gains in resource extraction were underpinned by a recovery in oil and gas production following facility maintenance in August and September in addition to heightened mining activity. Coincidentally, the manufacturing sector was supported by an increase in non-durable manufacturing, specifically, petroleum and coal products. On the services side, real estate and rental and leasing rose for a sixth consecutive month on the back of higher home sales activity in the Greater Toronto and Greater Vancouver areas. Additional support came from transportation and warehousing which experienced its third consecutive monthly increase despite labour strike activities. Lastly, revisions from the prior month suggest that the economy was on more solid footing entering Q4 than previously thought.

Looking ahead to November, housing starts and home sales External link. posted another strong advance, providing some economic tailwind. In addition, the recent Labour Force Survey External link. exhibited underlying strength in the labour market despite a slight uptick in the unemployment rate. However, this welcome news likely won’t change the fact that real GDP continues to lag the pace of population growth (graph 2).  

 

 

 

Our latest outlook for real GDP shows growth broadly in line with the Bank of Canada’s (BoC’s) Q4 projection of 2.0% in the October Monetary Policy Report (MPR). Still, our analysis External link.. suggests that as a result of the TMX, crude oil exports and production may increase more noticeably in the final quarter of 2024. When combined with an expected rebound in auto production in Q4 and the new fiscal stimulus measures External link., we believe there may be some upside risk to the BoC’s real GDP growth forecast of 2.0% in the fourth quarter.

 

The BoC recently announced another jumbo 50-basis point rate cut External link., citing weaker-than-expected economic conditions and the downside risks posed by slower population growth, as well as the threat of tariffs from the incoming Trump administration. Given lower inflation External link., below trend real GDP gains and persistent per-person economic weakness, we expect the Bank to pursue a more modest 25-basis point cut in January next year. Three additional rate cuts of the same size are likely through the remainder of 2025, as the mortgage renewal wall, lower population growth and tariffs could weigh down economic growth next year (see our latest Economic and Financial Outlook External link.).

NOTE TO READERS: The letters k, M and B are used in texts, graphs and tables to refer to thousands, millions and billions respectively. IMPORTANT: This document is based on public information and may under no circumstances be used or construed as a commitment by Desjardins Group. While the information provided has been determined on the basis of data obtained from sources that are deemed to be reliable, Desjardins Group in no way warrants that the information is accurate or complete. The document is provided solely for information purposes and does not constitute an offer or solicitation for purchase or sale. Desjardins Group takes no responsibility for the consequences of any decision whatsoever made on the basis of the data contained herein and does not hereby undertake to provide any advice, notably in the area of investment services. Data on prices and margins is provided for information purposes and may be modified at any time based on such factors as market conditions. The past performances and projections expressed herein are no guarantee of future performance. Unless otherwise indicated, the opinions and forecasts contained herein are those of the document’s authors and do not represent the opinions of any other person or the official position of Desjardins Group.