What Slowdown? Canadian GDP Tops BoC Call, Past Data Gets More Revisions

Canada’s economy is doing much better than expected, led by consumer spending and real estate investment. Statistics Canada (Stat Can) data shows real gross domestic product (GDP) growth surged in Q4 2024. The data came in significantly higher than the Bank of Canada (BoC) forecast. The agency also continued its trend of significant upward revisions of previous data, showing the country has been booming. Experts see the momentum carrying into the start of this year, before the effects of temporary stimulus fade. 

Canadian Real GDP Growth Tops Bank of Canada Estimate By 1 Point

Canadian economic output significantly topped every estimate of its economy. Annualized real GDP grew 2.6% in Q4 2024, nearly a point above the consensus estimate and the Bank of Canada (BoC) forecast. On a per capita basis, annualized growth fell another 1.4% as GDP still trails population growth. However, the slowing population and boosted output are starting to improve the trend and may produce some per capita growth this year. 

The big growth story this morning is household resilience. Real consumer spending saw annualized growth hit 3.6% in December, helped by the GST/HST holiday. The stimulus provided was limited as it only applied to the final few weeks of the quarter. However, the overall reduction in CPI helped to lower reported CPI, which is used to reduce nominal GDP into real terms (inflation).   

Canadian Real Estate Investment Sees Growth Surge

However, the bigger story is real estate’s boom—at least theoretically. Residential investment jumped 16.7% in Q4, the biggest move in 4 years. Residential construction in particular, saw 3.9% growth in Q4, the biggest jump since Q1 2021. It’s an interesting move considering historically weak new home sales and lower new construction activity. 

GDP quarterly growth rates in chained 2017 dollars. Source: Statistics Canada.

This most likely implies that the non-market, state investments in projects to bolster home prices may have enhanced this data. That is mostly an issue since it risks being a non-repeatable move, at the expense of future growth.  

Canada’s Economy Continues Its Revisionist History

Speaking of enhanced data, Stat Can found some more GDP hiding in their office. The agency added 0.2 points to both Q2 and Q3, respectively. It’s a fairly substantial adjustment, especially considering the meager growth previously reported. Just a few weeks prior, the agency also made massive revisions to its GDP data, effectively rewriting the impact of the pandemic. 

Experts see Q4 momentum carry into Q1 before fading. “We expect temporary fiscal stimulus measures, easier financial conditions, and further front-loading of exports to avoid tariffs will lead to a similar-sized advance in Q1 GDP,” wrote Michael Davenport, an economist at Oxford Economics Canada. 

He added, “However, new targeted US tariffs will likely come into place this spring and begin to dampen GDP growth by mid-year. Trump’s threatened blanket 25% US tariffs and a lower 10% tariff are less likely, but they would push Canada into a recession this year.” 

Most economists are treating tariffs as a sure thing, but in reality they may not be so scary. The probability of more targeted tariffs is still high, despite the rhetoric from policymakers claiming otherwise. The impact would be less devastating if they were more targeted, inflicting pain only in certain industries. Still not great, but it’s less of an issue than presented. 

On the other hand, GDP data starkly contrasts with household indicators. Few job vacancies, rising unemployment, and the country’s largest real estate market is seeing the fewest new home sales in over 30 years. Just a minor detail when it comes to a strong economy… or at least how they calculate its growth.