Statistics Canada reports 0.5% GDP growth in Q2 2024, despite challenges in key industries in June
Statistics Canada revealed that real gross domestic product (GDP) increased by 0.5 percent in the second quarter of 2024, following a 0.4 percent rise in the first quarter.
This growth was driven by higher government final consumption expenditures, business investment in engineering structures and machinery, and household spending on services.
However, declines in exports, residential construction, and household spending on goods moderated the overall increase. On a per capita basis, GDP fell by 0.1 percent in the second quarter, marking the fifth consecutive quarterly decline.
Government expenditures rose by 1.5 percent in the second quarter due to increases in compensation of employees and hours worked across all levels of government.
Business investment surged, with machinery and equipment spending up 6.5 percent, particularly in aircraft and transportation equipment. Investment in non-residential structures increased by 0.5 percent, primarily in the oil and gas sector.
However, business investment in non-residential building construction fell by 1.2 percent, reflecting declines in commercial and industrial structures. Business spending on intellectual property products edged up by 0.3 percent, driven by a 4.5 percent increase in mineral exploration and evaluation.
Household spending growth slowed to 0.2 percent in the second quarter, down from 0.9 percent in the first quarter. Higher expenditures on housing, food, and electricity were offset by fewer purchases of new trucks, vans, and SUVs, as well as reduced spending by Canadians abroad.
Population growth outpaced household spending, leading to a 0.4 percent decline in per capita household expenditures.
Net trade weakened as exports of goods and services fell by 0.4 percent, following a 0.5 percent increase in the first quarter. The decline in exports was driven by lower shipments of unwrought gold, silver, platinum group metals, passenger cars, and refined petroleum products.
Imports edged down by 0.1 percent, with decreases in industrial machinery, equipment, and refined petroleum products partially offset by higher imports of passenger cars and light trucks.
Residential construction continued its downward trend, falling by 1.9 percent in the second quarter, the largest decline since early 2023. This drop was driven by reduced investment in new construction, renovations, and ownership transfer costs, particularly in Ontario.
The GDP deflator, a measure of price changes, rose by 1.1 percent in the second quarter, led by higher prices for household consumption of services. Compensation of employees increased by 1.6 percent, driven by wage growth in health care, social assistance, education, and finance sectors.
The household savings rate reached 7.2 percent, as disposable income gains, mainly from wages and salaries, outpaced increases in consumption expenditure.
Corporate incomes rebounded in the second quarter, with total gross operating surplus rising by 3.1 percent after a 5.6 percent decline in the first quarter.
The operating surplus of non-financial corporations increased by 3.1 percent, led by gains in the oil and gas extraction sector, while financial corporations' surplus rose by 2.9 percent.
In June, real GDP was essentially unchanged, following a 0.1 percent increase in May. The goods-producing industries contracted by 0.4 percent, the largest decrease since December 2023, as declines in manufacturing and construction were partially offset by increases in utilities and agriculture.
The services-producing industries grew by 0.1 percent in June, marking the third consecutive month of growth, with 12 of 20 sectors expanding.
The manufacturing sector saw a significant decline of 1.5 percent in June, more than offsetting growth from the previous two months.
Durable goods manufacturing contracted by 2.4 percent, reaching its lowest level since November 2021, with transportation equipment manufacturing down by 2.1 percent, affected by retooling and production suspensions.
Non-durable goods manufacturing decreased by 0.3 percent, led by a 5.4 percent drop in plastics and rubber product manufacturing.
Wholesale trade fell by 0.7 percent in June, marking the second consecutive monthly decline, with the machinery, equipment, and motor vehicle subsectors contributing the most to the decrease.
The construction sector contracted by 0.6 percent, driven by declines across almost all subsectors, although residential building construction recorded a slight increase of 0.3 percent, driven by higher apartment construction.
The utilities sector posted a 2.3 percent increase in June, driven by a rebound in nuclear electricity generation and higher natural gas distribution.
The transportation and warehousing sector contracted by 0.3 percent, with air transportation down by 1.9 percent due to a pilot strike at a major Canadian airline.
However, pipeline and water transportation saw increases, with pipeline transportation rising by 2.6 percent due to the newly expanded Trans Mountain pipeline.
The real estate and rental and leasing sector grew by 0.3 percent in June, with home sales in Ontario and Quebec contributing to the rise. The finance and insurance sector increased by 0.5 percent, driven by gains in financial investment services and increased activity in the bond markets.
The public sector, comprising educational services, health care, and public administration, continued its growth, rising by 0.2 percent in June, though at a slower pace than in previous months.
For the second quarter as a whole, real GDP by industry rose by 0.5 percent, with growth in both goods-producing (+0.4 percent) and services-producing (+0.6 percent) industries.
The public sector was the largest contributor to growth for the second consecutive quarter, driven by increased activity in education and health care. Mining, quarrying, and oil and gas extraction rose by 2.5 percent, with the oil and gas extraction subsector leading the way.
The transportation and warehousing sector expanded for the ninth consecutive quarter, while the finance and insurance sector posted its highest quarterly growth rate since 2021.
However, the construction sector dampened overall growth, with a 0.4 percent decline, and the manufacturing sector edged down by 0.2 percent, continuing its decline for the fourth consecutive quarter.
