Canada’s economy displayed signs of weakness towards the end of 2024, despite aggressive interest rate cuts by the central bank. Statistics Canada reported on Monday that advance data indicates a 0.1% contraction in gross domestic product for November, marking the first monthly decline this year. This follows a stronger-than-expected 0.3% expansion in October, which surpassed economists’ predictions of 0.2% growth.
The October-November data suggests the economy is growing at a 1.7% annualized pace in the fourth quarter, assuming flat growth in December. While this exceeds economist estimates of 1.5%, it falls short of the Bank of Canada’s 2% forecast. The projected growth represents an acceleration from the 1% expansion seen in the third quarter.
October’s growth was primarily driven by the mining, quarrying, and oil and gas extraction sector, which expanded by 2.4%. However, this sector’s strength appeared short-lived, contributing to November’s decline. The real estate sector showed positive momentum, rising 0.5% in October, its sixth consecutive monthly increase.
Looking ahead, factors such as Canada’s immigration policy changes, a temporary sales tax holiday, potential U.S. tariffs, and political uncertainties surrounding Prime Minister Justin Trudeau’s leadership may impact growth and inflation forecasts.
Economists suggest that while interest-rate sensitive areas of the economy have shown improvement, further rate cuts may be necessary in 2025 to close the output gap. The Bank of Canada’s next policy decision is due on January 29, accompanied by updated economic projections.
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