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Economic News

Quebec: Real GDP Rallies as Expected in the First Quarter of 2024

June 27, 2024
Hélène Bégin, Principal Economist • Maëlle Boulais-Préseault, Economist

Highlights

  • After a few months of volatility due to the healthcare and education sector strikes, Quebec's economy is showing signs of recovery.
  • Real GDP advanced at an annualized rate of 3.6% in the first quarter of 2024, after dropping 0.4% in the last quarter of 2023.
  • This is better growth than Canada as a whole posted over the same period (1.7% at an annualized rate).
  • Despite the sharp rise in household spending, the savings rate jumped from 12.7% to 14.0% between the last quarter of 2023 and the first quarter of 2024. This is due to an increase in real household disposable income.
  • The housing market continued to ramp up over the first quarter, thanks to a resurgence in new construction and by a rally in the resale market, which in turn boosted commissions for real estate brokers. However, renovations continue to slide.
  • Total exports fell by about 5%, the largest contraction since Q3 2022. This decline can generally be attributed to reduced exports to the United States.
  • And finally, business investment has increased for the first time since Q1 2022. Investments in machinery and equipment made the greatest contributions, while investments in non-residential structures have been depressed for three quarters now.
  • See table below for more details.

Comments

After a number of major challenges—and three straight quarters of real GDP contraction—there finally seems to be a light at the end of the tunnel. The economic slowdown that began in spring 2023 seems to have ended, and Quebec's economy is growing once more. Over this period, real GDP fell about 2%, a cumulative decline similar to what we saw during the 2008-2009 recession.

In contrast, the labour market was fairly resilient last year, due to structural demographic factors. Since employment typically lags behind overall economic performance, we expect it to hold steady in the next few months, though unemployment should approach 6% before 2024 ends.

In addition to the widely anticipated rebound by real GDP in the first quarter, Quebec's economy is sending other positive signals. Consumer spending bounced back with a vengeance and the savings rate is holding at a high level, thanks to a rapid advance by personal disposable income. This gain is fueled by wage growth, not an increase in employment: paychecks are swelling because of sticky inflation, collective bargaining agreements and companies' desire to retain their employees. And of course, the housing market recovery is great news, as is the bump in machinery and equipment investments. 

Implications

While economic conditions in Quebec are improving, many businesses and households are facing difficult, and even dire, financial situations. The Bank of Canada should continue to cut its key rates this year and next year, which should help borrowers and solidify the economic recovery that has already begun in Quebec. 

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.