Canada Disposable Income (ann. var. %)

Economy records weakest reading since Q2 2021 in Q4

GDP was flat in seasonally adjusted annualized rate terms (SAAR) in the fourth quarter, below the 2.3% expansion seen in the third quarter. Q4’s reading marked the worst result since Q2 2021, and undershot market expectations. However, the reading was dampened by a slower inventory accumulation and underlying momentum was more robust than the headline data suggested, with ongoing growth in consumption and exports.

Household spending increased 2.0% in the final quarter, which contrasted the third quarter’s 0.4% contraction. A robust labor market and easing price pressures likely supported the Q4 figure. Public spending growth moderated to 2.4% in Q4 (Q3: +4.8% SAAR). Meanwhile, fixed investment fell at a milder rate of 2.6% in Q4, following the 6.7% contraction recorded in the previous quarter.

Exports of goods and services growth fell to 0.8% in Q4 amid soft demand abroad (Q3: +10.6% SAAR). In addition, imports of goods and services declined at a steeper rate of 12.0% in Q4 (Q3: -1.8% SAAR), marking the worst reading since Q2 2020. As a result, net trade contributed positively to overall GDP.

On an annual basis, economic growth waned markedly to 2.1% in Q4, from the previous quarter’s 3.8% growth. Q4’s reading marked the slowest expansion since Q1 2021.

Flash data suggests the economy grew 0.3% month on month in January thanks to increases in mining, energy, wholesale and transport sectors, among others.