Canada’s economy might be stronger than expected according to this week’s data. Statistics Canada (Stat Can) data shows real gross domestic product (GDP) grew in April. Even with preliminary numbers showing growth stalling in May, output is still set to outperform the central bank’s expectations. Most weakness is contained to just a few sectors, including housing—which is providing a drag despite increased state-stimulus.
Canadian Real GDP Rises In April, Higher Growth Than BoC Expects
Canadian economic output made a big advance in the latest report. Real GDP climbed 0.3% in April, matching the preliminary estimate a month prior. May’s preliminary data wasn’t quite as robust at 0.1%, but even just that would be enough to best the central bank’s estimate for growth.
Source: Stat Can.
“The two months combined put Q2 on track for nearly 2% annualized growth, which is a bit stronger than the BoC’s (and our) 1.5% call for the quarter, but we’ll await further data before adjusting our forecast,” wrote Douglas Porter, Chief economist at BMO.
His calculations show real growth for 2024 is so far on track for 1% annual growth. “That’s not a recession by any means, but it’s also pretty soft, especially in light of 3%+ population growth,” he explained.
Canadian GDP Held Back Housing, Which Has Dropped 24%
The weakness in the latest numbers was almost entirely attributed to the slowdown in housing. The agency notes construction fell 0.4% in April, with residential building construction responsible for the collapse. The U.S. component fell 2.3% in the month, and is 24% lower than it was at the peak hit in April 2024. Policymakers pumping tens of billions in capital to stimulate residential construction has had the opposite of the desired effect—propping up prices and preserving the cost inefficiencies.
On the upside, more than three-quarters of components in GDP saw growth in the latest report. A rebound for resources, which saw the Mining, Quarrying, and Oil & Gas Extraction (+1.8%), was a particularly big contributor.
Canada’s economic picture is blurry these days, especially to those looking for insight on when the next rate cut is coming. Higher-than-expected real GDP growth follows an acceleration in headline and Core CPI, showing demand is far from dead.
Unemployment is rising, but that’s not due to the country adding fewer jobs—Canada has seen employment grow at a fairly robust rate over the past few years. The issue is the population’s rapid expansion has resulted in workers growing at 3x the rate jobs are added.
None of these are factors that would pressure interest rates lower.
GDP is rising, why lower the interest rates?
Because interest rates are to manage inflation, not GDP.
Ever heard of gdp per capita?
Also if the only sector that grew every month for the last year is public, it’s bad. Stop calling g yourself the stats guy.
Of course GDP will rise we’re importing a million ponzis a year.
What is falling off the cliff is our GDP per capita.
I think Doug underestimated a tad. I calculated that the annualized growth rate for 2024Q2 as compared to 2024Q1 would be 2.05%, not something approaching 2%. Not that it matters much. Given our social engineering government’s dysfunctional policies for bringing foreigners into the country en masse, even the monthly real GDP increase for April 2024 becomes a decrease in real GDP per member of the active population, and of course this would be much more true for May. When we are in a longstanding GDP per capita recession, the Bank of Canada should be lowering interest rates, especially when the inflation rate has been very close to 2.0% every since the start of the year, if one takes the CPI excluding mortgage interest as the target inflation indicator. (I told Chrystia Freeland that she should change the target inflation indicator to exclude mortgage interest before the 2021 renewal of the inflation-control agreement, but she isn’t the sharpest tool in shed, or the most courteous of ministers either; she never even bothered to acknowledge the receipt of the documents that I sent her.)
Lower interest rates back to 0% to support housing.