Economy Sees Growth in First Quarter, but Shows Sign of a Slowing Economy

  • Real gross domestic product (GDP) was essentially unchanged in March, following a 0.2 per cent increase in February. Looking at the first quarter as a whole, real GDP rose by 1.7 per cent on an annualized basis, after a large downward revision to the fourth quarter reading, where growth was essentially flat.
  • Household spending increased by 0.7 per cent in the first quarter, primarily due to a 1.1 per cent rise in spending on services. Spending on services continues to be a positive feature of the economy, as per capita spending on services increased 0.5 per cent in the first quarter, while per capita spending on goods fell for the 10th consecutive quarter.
  • Slower inventory accumulation tempered first quarter growth. Businesses added to their non-farm inventories in the first quarter (+$30.8 billion) at a slower pace compared with the fourth quarter of 2023 (+$40.3 billion). Retail motor vehicles recorded the largest deceleration, accumulating inventory at half the pace of the previous quarter.
  • Business investments finally performed better, as real business capital investment rose 0.8 per cent in the first quarter, with investment in machinery and equipment rising by 1.6 per cent. The increase was driven by increased spending on engineering structures, primarily within the oil and gas sector.
  • Corporate incomes fell 4.9 per cent in the fourth quarter, a sign corporation are being impacted by lower demand in the economy. The lower gross operating surplus of non-financial corporations was fuelled by decreases in the oil and gas sector, where price declines reduced incomes. Charter banks helped financial corporations see a rise in corporate incomes in the first quarter, increasing by 0.3 per cent.
  • In March, industry output increased in 11 of 20 industrial. On net, both goods-producing and services-producing industries were essentially unchanged in March.
  • Among goods-producing industries. Construction rose 1.1 per cent in March, the largest monthly growth rate since January 2022, as almost all types of construction activity for the month. The manufacturing sector was the largest detractor to growth in March, as retooling at auto assembly plants impacted manufacturing activity.
  • Among service-producing sectors, the public sector saw the largest increase, rising up 0.2 per cent in March, in part from the impact of the Quebec public sector workers’ strikes.


Today’s release of GDP estimates shows that Canada’s economy started the year with a good performance. Real GDP increased by 1.7 per cent (annualized) in the first quarter, below last year’s first-quarter growth of 3.4 per cent (annualized), but noticeably stronger than the downward revised 0.1 per cent in the last quarter of 2023. Higher household spending on services was the main contributor to the increase in GDP, while slower inventory accumulations moderated overall growth. The first quarter performance indicates a resiliency in the Canadian economy despite high interest rates, although the revised reading for the fourth quarter dampens some optimism. Various factors that have so far buoyed the economy the last two years such as record population growth, post-pandemic savings, and a strong wage growth from a tight labour market, are all slowing, so the economy is beginning to face pressure from trends other than high interest rates.

Looking ahead, the economy may continue performing modestly until interest rates decrease. Indicators point towards a rate cut in the summer, supported by recent inflation data showing a cooling of the consumer price index to 2.7 per cent in April from 2.9 per cent in March. Although April’s job growth exceeded expectations, the unemployment rate remained steady at 6.1 per cent, up 1.0 percentage point from a year earlier. This anticipated movement towards rate cuts sets a favorable trajectory for the economy to finish the year on a stronger growth path.

To learn more about Canada’s economic outlooks for the long-term or the next five year’s, please visit our Canadian Outlook.