Quebec: Real GDP Looks to Be Back on a Growth Path

Now that the public sector strikes aren’t skewing the real GDP data anymore, an underlying trend has begun to emerge. It looks like Quebec’s economy has started to pick up after contracting between Q2 2023 and the end of last year. Q1 carry-over growth (how much real GDP would grow if growth was zero following the March release) came in at 3.9%. Previous months’ prints could still be revised lower and real GDP may have dipped in March, but 2024 started off strong.

Even though the recovery seems to finally be underway, we could still see some monthly real GDP declines in the near term. Things look good overall, but many industries are still struggling, including the goods-producing industries. Many businesses are feeling the squeeze of weak product demand, high production costs and elevated interest rates, as evidenced by the growing number of business bankruptcies in Quebec.

On the services side, industries that depend on consumer spending are going through a rough patch. High interest rates and inflation have eroded purchasing power, which means households are spending less on discretionary goods and services and big-ticket items. This includes clothing and recreational goods, as well as furniture, appliances and electronics.

As projected in our latest forecast External link., Quebec's economy has begun to recover following a prolonged period of weakness last year. The economy bounced back strong in January when the strikes ended, suggesting slightly positive prints ahead. And the Desjardins Leading Index This link will open in a new window., which predicts economic recoveries in Quebec a few months out, has been on the upswing recently. All signs therefore point to Quebec's economy making a sustainable comeback in the next few months, although we could see some temporary setbacks in the near term. The economy is finally starting to recover, and that will become even more apparent in the second half of the year.