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Economic Growth Continues to be Sluggish but Positive News in the Details

May 31, 2019

The Conference Board of Canada’s Director of Economics, Matthew Stewart offers the following insights on today's GDP release:

“Although economic growth remained sluggish in the first quarter of 2019, the details suggest a more positive story. While consumer spending has bounced back strongly, the most positive news was that business investment finally appears to be firming. Business investment has been very weak over the last year and without a substantial increase in investment, we are unlikely to see a stronger economic performance.”


  • Real GDP grew by a meagre 0.4 per cent at annual rates in the first quarter of 2019. Although this is the second straight quarter of slow growth, as you dig into the details, there are reasons to be optimistic.
  • Consumer spending bounced back strongly after a poor performance in the second half of 2018. We had expected some bounce back given the very strong employment gains and solid wage growth in recent months. Even still, the 3.5 per cent increase in spending was substantial and suggests households may not be having as much difficulty with their substantial debt burden and rising interest rates as many feared.
  • The best news came on the business investment side. Business investment has been very weak in recent years and declined through much of 2018. In the first quarter of 2019, business investment in machinery and equipment and structures increased by a solid 13.5 per cent. Although this doesn’t fully wipe out the recent decline, it suggests that business’s may finally be responding to new federal tax initiatives and are willing to invest in new capacity.
  • On the negative side, residential investment continued to fall with a 6.1 per cent decline in construction in the first quarter. New home construction fell by 14.4 per cent.
  • Exports volumes declined by 4.1 per cent at annual rates in the first quarter. Crude oil exports fell by 2.8 per cent as production quotas in Alberta took effect.
  • Meanwhile, imports rose 7.7 per cent. The result is that net trade removed $19 billion or 3.7 per cent annualized from GDP.
  • While the trade sector took a toll on economic growth this quarter, the export numbers were encouraging in March suggesting we will see stronger growth over the rest of 2019 particularly as the energy sector starts to bounce back.
  • The monthly GDP report also pointed to better economic times ahead, adding to evidence that the recent slump was indeed temporary. Overall, real GDP increased by a whopping 0.5 per cent in March, offsetting the 0.2 per cent decline recorded in February.
  • The goods producing sector saw solid growth after trending down over the last several months. Activity in the manufacturing sector increased by 0.9 per cent, while the mining sector increased production after declining over the last six months.
  • While the overall GDP number shows that economic growth continues to be sluggish, the improvement in consumer spending and the recovery in business investment is encouraging. Overall the recent release is consistent with our current economic forecast current economic forecast that projected stronger economic growth in the second half of 2019.

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