Rising household spending drives growth, but declining business investment dampens momentum
Canada’s economy experienced a modest 0.3 percent growth in real gross domestic product (GDP) during the third quarter of 2024, according to Statistics Canada.
This follows increases of 0.5 percent in the first and second quarters, highlighting a slower pace of growth.
The gains were driven by higher household and government spending, which were counterbalanced by reduced business investment, slower inventory accumulation, and declining exports.
On a per capita basis, GDP declined by 0.4 percent, marking the sixth consecutive quarterly drop. Household spending played a significant role in the growth, increasing by 0.9 percent in the quarter.
This rise was primarily attributed to higher expenditures on new vehicles, particularly trucks, vans, and SUVs, along with financial services.
However, spending on accommodation and food services decreased. Per capita household expenditures edged up by 0.2 percent, reflecting a partial recovery after declines in recent quarters.
Government spending also contributed to growth, rising 1.1 percent for the third consecutive quarter. Spending increased across all levels of government, continuing the trend seen since the fourth quarter of 2023.
Meanwhile, businesses added $18.5bn to non-farm inventories in the third quarter, a slower pace compared to $27.8bn in the second quarter. This deceleration was primarily due to reduced accumulations in retail motor vehicles and drawdowns in manufacturing inventories.
Business investment presented a mixed picture, with a notable 7.8 percent decrease in spending on machinery and equipment.
Lower expenditures on aircraft and transportation equipment coincided with a decline in imports of these goods.
Investment in non-residential structures was largely unchanged as increased spending on engineering structures offset declines in building construction.
Intellectual property product investments rose by 1.4 percent, driven by growth in research and development and mineral exploration.
Housing investment grew by 0.8 percent, marking its first expansion since the third quarter of 2023. This growth was driven by a 4.9 percent increase in ownership transfer costs, reflecting higher resale activity.
However, spending on new construction and renovations slightly declined.
In Ontario, a decline in apartment absorptions tempered gains in new unit construction.
Exports fell by 0.3 percent during the quarter, following a larger decline of 1.4 percent in the second quarter. Lower exports of unwrought gold, passenger vehicles, and travel services were key contributors to this decrease, though increased crude oil and bitumen exports helped mitigate the decline.
Imports also edged down by 0.1 percent, driven by reduced imports of passenger vehicles and other transportation equipment.
Manufacturing contracted for the fourth consecutive month in September, with the sector shrinking by 0.3 percent. Declines in non-durable goods manufacturing offset gains in durable goods production, which rose by 0.2 percent.
Transportation equipment manufacturing saw a 1 percent increase, reflecting higher production levels at motor vehicle and parts plants.
Services-producing industries expanded by 0.2 percent in September, marking their fourth consecutive month of growth. Retail trade increased by 1 percent, led by gains in food and beverage stores and gasoline stations.
In contrast, goods-producing industries contracted by 0.3 percent, driven by declines in mining and oil and gas extraction.
The household saving rate rose to 7.1 percent in the third quarter, its highest level in three years. Disposable income grew by 2.3 percent, outpacing a 1.2 percent rise in nominal spending.
Falling interest payments on mortgages and consumer credit contributed to this increase, supported by a series of Bank of Canada rate cuts between June and September 2024.
Looking ahead, preliminary estimates suggest GDP increased by 0.1 percent in October, driven by gains in real estate, transportation, and retail sectors.
However, declines in construction and resource extraction activities tempered overall growth. Finalized data for October is expected later this month, providing further insights into the economy's trajectory.
