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Canada GDP Q4 2023

Canada: The economy bounces back in Q4

GDP expanded 1.0% in seasonally adjusted annualized rate terms (SAAR) in the final quarter of 2023, contrasting the 0.5% contraction recorded in the third quarter. Q4’s reading marked the best result since Q1. On an annual basis, economic growth picked up to 0.9% in Q4, following the previous period’s 0.5% increase.

The quarter-on-quarter upturn reflected improvements in private consumption, fixed investment and exports. Household spending accelerated to 1.0% SAAR in the fourth quarter, which marked the best reading since Q1 (Q3: +0.5% SAAR). Strong population growth and moderate inflation and unemployment likely aided spending. Moreover, fixed investment slid at a slower pace of 3.8% in Q4, following the 4.1% contraction recorded in the prior quarter. Government spending dropped at the sharpest pace since Q3 2023, contracting 1.9% (Q3: +6.7% SAAR).

Exports of goods and services grew 5.6% in seasonally adjusted annualized terms in the fourth quarter, which marked the best reading since Q1 (Q3: -1.3% SAAR). Higher exports of oil, travel services and transport equipment drove the reading. Conversely, imports of goods and services deteriorated, contracting 1.7% in Q4 (Q3: +1.1% SAAR).

A flash estimate put GDP growth at 0.4% in January, buoyed by increases in educational services and health care and social assistance, after the conclusion of the strikes in Quebec in December. Over Q1 as a whole, our Consensus is for another mild quarter-on-quarter expansion.

On the Q4 GDP reading, Goldman Sachs analysts said:

“[The Q4] report confirms our view that activity is gradually picking up after stagnating in the middle quarters of 2023, although growth remains well-below potential and spending on a per-capita basis continues to decline.”

TD Economics’ James Orlando sounded a more downbeat note:

“A return to growth in the fourth quarter was widely expected, following two quarters of effectively no growth in the country. While today’s report came in […] much better than what the BoC was thinking (0% q/q), the narrative on the Canadian economy remains the same: High interest rates are weighing on economic growth. Stripping out international drivers, the economy contracted, while GDP per capita has now declined in five of the last six quarters.”

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