Canada’s economy is close to contraction, with public sector growth the last pillar holding it up. Statistics Canada (Stat Can) data shows real gross domestic product (GDP) was unchanged in August. A Big Six bank warns that despite maintaining robust population growth, only non-business growth remains positive. The combination of factors continues to erode at per capita GDP, now in decline at a pace never seen outside of serious recession in Canada.
Canadian GDP Showed Zero Growth, Per Capita Decline The Sharpest Outside of Recession
Canadian real GDP made no progress in the latest report. Seasonally adjusted it was unchanged in August, following just 0.1% growth a month prior. Goods producing industries (-0.4%) were hit the worst, while services (+0.1%) managed to inch out minimal growth.
National Bank of Canada Financial (NBF) wrote to investors suggesting the data is worse than it looks. Adjusting for population emphasizes this isn’t a zero growth environment, but a record addition of new people consuming goods and services were needed to get up to zero.
“Consequently, GDP per capita has fallen by around 4.0% cumulatively since 2022, which is unprecedented outside a recession,” explains Matthieu Arseneau, deputy chief economist at NBF.
Canadian Real GDP Only Showing Non-Business Growth, Driven By Public Administration
Eroding productivity and quality of life is just part of the bad news. The bank also points out that private business growth is contracting, a problem that was suggested with yesterday’s data on stagnant business growth in 2024. The economy’s growth is now confined to public sector spending, and not where many would hope.
The public sector (+0.2%) was the second largest growth sector in last month’s real GDP, the 8th consecutive month it continued to grow. Teachers and doctors weren’t behind the move, but growth was primarily driven by expansion of public administration. It’s been a persistent trend recently, especially at the municipal level.
Only the finance sector (+0.5%) outpaced public sector growth. Though Stat Can noted it was “higher than usual,” with an “atypical” role played by the bond market. Government bonds of course being the largest segment and used to pay for spending not covered by revenue, implying public sector expansion is behind this growth too.
A declining business environment and soaring public sector growth is expected only in recession, not unlike declining per-capita real GDP. If the economy is entirely dependent on the public sector expansion just to get to zero growth, the economic outlook isn’t great.
“…a number of indicators do not bode well for a stabilization of the labour market in the coming months. Hiring intentions remain below historical norms and the sharp decline in private sector vacancy rates does not point to a recovery in the labour market,” explains Arseneau.
Adding, “In our view, further substantial interest rate cuts will be needed before GDP per capita and the unemployment rate stabilize.”
Rates should be lowered to 0% to support real estate which is the most important part of the Canadian economy.
Trudeau and Freeland entered into an economic transition, from a resource economy to whatever we have now. They promised it wouldn’t affect the economy, dollar or exports.
The problem is that is not possible. Canada is one of the world’s largest oil and gas producers, with the 3rd largest reserves of oil on earth. This also means we are a major producer of petrochemicals, fertilizers, equipment and technology for resource extraction.
Instead of using this strength to develop a green resource sector thT would put Canada into a spot like Norway, Saudi Arabia, Holland, and Scotland, we got a plan to phase out production by 2050?
Now this plan isn’t really a plan. Canada doesn’t have any expertise or heavy industry in green tech, beyond some auto parts production?
So how are you going to replace the biggest and most profitable sector with civil servants, and bankers? Economically these are parasites. They don’t produce anything of value, they don’t export anything.
So we have a recession caused by Trudeau failed economic plan, covered upby massive increase in bankers, realtors, bureaucrats, who not only add nothing of value, they drive investment away from businesses that need it into building 500 so ft condos no one can afford.
Canada’s banks are struggling to diversify their credit books from real estate, and Freeland just gave them that path. Increasing chmc mortgage limits, and dumping that risk on taxpayers. We need them gone now, before the national debt is 5Tr
With all these useless landlords and greedy diploma mills, it’s no wonder lol
A journalist for a finance minister, a governor that prints money at will, an administration that claims Canada has the best recovery of G7 , most Canadians’ bank accounts beg to differ.
Aww you guys are no fun 🙁
Government Jobs are not contributors to growth. They are net drag on the economy by raising taxes to pay their wages. When too many non contributors productivity declines with them and economy declines and countries become poor. Welcome to the Trudeau Canada. All you people in Canada who voted for this bad leader and government remember that when the chance to vote comes again.
Me, myself, believes that interest rates should be cut to 0% once again to boost the real estate sector. The real estate sector will boost the entire economy and make Canada very rich!
People say housing is too expensive but Price to Income ratio is only 11 in 2023. In China, it is 30 and my friends tell me housing property is booming over there. So many property and so much construction, there is inclusive prosperity happening all over there.
Me, myself, believes we are too afraid to make the hard decisions. But the hard decisions are needed. We need to focus on the most important sectors of the economy which is not oil and gas (we have to be environmentally friendly) or technology (america will eat that cake anyway). The correct sector to boost is real estate.
A Canada is a resource based economy. Let’s get back to massively developing our resources and then utilize some of the revenue to developing secondary and tertiary industries in IT, green tech, services, advanced manufacturing, tourism, etc. Until we do that, Canada’s economy will continue to suffer and Canadians will continue to see a severe decline in their quality of life and wealth, no matter what Justin Trudeau or Chrystia Freeland say.
Thank you, Charlie. Your comment is spot on!