Canada’s economy is expanding, but the details are worth reviewing before getting too excited. Statistics Canada (Stat Can) data shows real gross domestic product (GDP) grew more than expected in Q2 2024. A dive into the details shows productivity further eroded on a per capita basis, while household spending weakened. Most growth is now government spending, accounting for a whopping 80% of the quarter. Canada increasingly resembles an economy in recession, despite not quite meeting the country’s preferred definition of one.
Canadian GDP Shows Huge Growth, But 80% Is Now Government
On the surface, Canada’s economy is ripping higher. Annual real GDP growth climbed to 2.1% in Q2 2024, higher than the consensus estimate. It follows 1.8% growth in Q1, which saw an upward revision from the 1.7% originally reported. By itself, this sounds like the economy is just booming. Heck, it even beat expectations—but most readers likely noticed it didn’t keep up with the population.
When adjusted for population, the picture isn’t so rosy. Real GDP per capita declined 0.1% in Q2 2024, with Stat Can noting it was the fifth consecutive decline. Per capita growth fell in 7 out of the past 8 quarters, marking a recession by some definitions.
Canadian Per-Capita GDP Is Negative For A 5th Consecutive Quarter
Canadian per-capita real gross domestic product (GDP).
Source: RBC.
“Although slightly above expectations, the details behind the Q2 GDP increase are softer than the headline growth rate and per-person output continues to decline,” said Abbey Xu, an economist at RBC.
Adding, “details are not as strong as the headline number, by our count a surge in government spending accounted for 80% of the Q2 GDP increase.”
By itself, government spending is neither good nor bad. What may be concerning is the scale relative to other industries. When government spending represents a larger share of the economy, it emphasizes how little other sectors are growing.
Canadian Households Weaken, Spending More On Necessities
Casting further doubts about the economy’s strength are weaker households. Household spending grew 0.2% in Q2 2024, slowing from the 0.9% in Q1. Stat Can attributed the minor growth to rising rents, food, and energy costs. Households spent more on necessities that were not captured in the inflation data, printing “growth.”
Canadian Housing Investment Falls Even Further
Canadian housing investment slowed further despite spending billions in taxpayer stimulus. Residential investment fell 1.9% in Q2 2024, marking the most significant drop in over a year. Leading the decline were new construction (-1.6%), renovations (-2.6%), and ownership transfer costs (-1.1%).
The real estate industry initially expected a boost due to falling borrowing costs. Few signs have since materialized, with those expectations of improvements now pushed to mid-2025.
On the upside, it wasn’t all bad. Canada saw a big improvement in at least one area—inflation.
“Recent economic data indicates that inflationary pressures have broadly eased, with breadth of goods impacted by abnormally high inflation narrowing to pre-pandemic levels, and the softening economic backdrop should reinforce the Bank of Canada’s view that the economy has softened enough to keep inflation on a downward trajectory,” explained Xu.
Canada may have printed impressive headline growth, but this was not a great quarter. Productivity is on the slide, job vacancies are falling, and unemployment is rising. Real GDP growth was 80% due to rising government consumption, and the rapid expansion of administration is now Canada’s primary job maker. It’s not officially a recession, but excluding aggregate GDP—this is what a recession looks like.
Bingo! Glad you clarified this time Daniel. Without explicitly an opinion on the issue, many assumed it was an attack on the government.
In a healthy economy, that should only be 10% of the growth. If it’s 80%, it means other industries should have been growing at 7x the rate they are. The problem is the poor business environment, and we have a technocrat in charge of the Federal & Ontario governments—only large industrial players are allowed to grow. Exact opposite of the US, which is still booming.
He shouldn’t have to. If you mention “1 in 4 employed in Canada work for government,” it’s clear to anyone that reads at a grade 4 level that is an objective fact.
This is why everyone hates gov employees. They know they’re getting away with an overly easy job & know their work doesn’t justify the size of gov. They’re
Why is the government suddenly spending so much? It must be election time.
You might be right but not in the way people think. Regional governments are behind most of the growth, but the Fed picks up the tab to buy political favor and alignment for the next government. Look at Vaughan. All of a sudden the OLP leader wants to do a nice and quiet job in municipal politics as the mayor?
What do you expect when they just want rent serfs to fork over their wages in paying exorbitant rent to a slumlord?!
Doesn’t this imply negative growth per capita in the private sector?
We’re at zero per capita on average
Government is growing
Therefore to achieve zero per capita average growth we have to have negative private sector growth.
More than that when factoring inflation and cost of the borrowing.
1. 80% of 2.1% of growth is 1.68%. Actual growth is less than 0.5%. Add in CPI (if it’s real), we have negative growth. On top of that, the deficit grows (more CPI in nominal terms). This is mismanagement to the teets. Any CEO would be removed by the board already. And the board would be gutted by share holders. Canadians are simply too nice.
It’s foreshadowing of things to come. If conservatives are elected, government will be cut in half or better. Leaving a lot of people unemployed. People will have to vote liberal or be out of work. The other is government spending only props up the economy in the short term… You can’t have government as your source of growth… Or you have an indebted nation. Higher taxes, then services cut, then development into a third world country. Super rich and super poor. We let our economy collapse and we build back with lessons from the past.
Give billions of tax dollars to huge corporations to build massive plants. Staff them with temps that are subsidized by the government. Allow them to bring their entire families which puts a strain on housing, health care & education. These workers will send a lot of their tax payer funded incomes back to their home countries. Use the media to tell Canadian born citizens they are hateful far right thugs if they do like what is happening.
80%? That is amazing, and no surprise the finance minister is touting how we are headed for a soft landing due to the feds policies. The rabbit ears (pocket liners pulled inaide out) is quite evident given spending is at 0.2% by households that bore the brunt of repeated attacks , the middle class , or what was the middle class. Smoke and mirrors, manipulated numbers. Carney being Freeze lands kids godfather must have been consulted. Hopefully not, look at the mess he left at BOE.
Wow, the Bank of Canada did it’s job. As they said they would, they’ve slowed the economy and inflation is heading down to the target range. Meanwhile, the collective governments of Canada seem to have upped spending to somewhat soften the inevitable blow to the economy. If this is all we have to muddle through after dumping all that pandemic money… okay. I, like most people, expected a lot worse.
While this was going on, we’ve managed to absorb the surge in immigration we need to offset the “great Boomer retirement.” Being GenX, I’ve been told since grade school that this was coming: pensions gone, medical system in distress, nobody to work, on and on… been hearing this for my entire life. Why people are surprised by it now is beyond me. Again, without the surge in immigration, it would be a lot worse.
Considering our institutions have managed “this” as a consequence of the pandemic spending and long-term historical trends, all I can really say is that they’ve done a decent job… by institutional standards it’s outstanding.
Now, if we don’t get hit by something else, maybe they can start reducing the deficit spending. That would be nice. We’re not in a good place politically for that but, considering all the above, I remain hopeful.
The productivity crisis is rooted in over regulation and massive administrative costs and hold ups. Which was pointed out in the article as the highest growing sector is administration.
For example in may I submitted for permits to build a deck. The municipality took 2 months to approve the development permit and I still have never recieved approval for the actual building permit. It’s now nearly September and something that should have been build in may/June will probably be delayed until next year now. And that’s just for a deck.
August 2024, Canadian household debt to income is 177%. The US, pre 2007 financial crisis, was 137%. 2/3 of all mortgages have a loan to value ratio of over 65%. Provisions for losses for loans are increasing for creditors, ie borrowing money will be more difficult. This means the consumer, which is 60% of all GDP, is dead for the next 2 to 4 years. She is over extended and few will lend her any more cash. Welcome to the hangover.
Need to verify this but was told we are number three in the G7 for GDP and look fairly good then we add and do the number on a per capita basis and we are dead last.
Adding more government employees that are completely unproductive and more cra auditors doesn’t help the economy grow it just adds more people to unproductive jobs that burden everyone else
I think a helpful stat to show would be that the United States is only at 27%, and other countries across the ocean are only at 36% like Norway and its highest it ever got was 51% during post recession….
spending is a misnomer… how many BILLIONS have they GIVEN away to their friends and to enemy countries ???