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Real GDP Sees Small Growth in November

Canadian Economics

By: Viktor Cicman

  • Real gross domestic product (GDP) grew by 0.2 per cent in November. The release also came with a preliminary estimate of 0.3 per cent growth in December. This was the first substantial sign of economic growth for a while, after three consecutive months of a stagnant economy. Impressively, 13 out of 20 industries grew. Most of the growth came from the goods-producing sectors, which increased by 0.6 per cent, its highest monthly growth rate since January 2023.
  • Among goods-producing sectors, the largest gains were in manufacturing, which rose by 0.9 per cent. Non-durable goods increased by 1.2 per cent. Most of this increase came from the chemical manufacturing sub-sector which ramped up production following a number of petro chemical plant shutdowns in the third quarter.
  • Mining, quarrying and oil and gas extraction increased for a second consecutive month, growing by 0.3 per cent in November. The oil and gas extraction subsector saw the biggest increase, rising by 1.5 per cent. The strength was based on the rebound in oil sands extraction, which grew by 3.8 per cent in November, the largest monthly growth rate since April 2022.
  • Service output increased by 0.1 per cent for the month. Transportation and warehousing led services, growing by 0.8 per cent in November. The end of St. Lawrence seaway strike helped water and truck transportation rebound from a decline in October. The largest contributor growth in the sector was rail transportation, increasing 2.2 per cent, due to increases in coal and forestry product carloadings.
  • Information and cultural services finally saw an increase in output after 5 months of decline. The motion picture and sound recording sub sector experienced the largest increase, rising by 2.9 per cent. Once again this is attributed to the end of a labour dispute, as the Strike by the Screen Actors Guild–American Federation of Television and Radio Artists which began in July ended in November.

Insights

Today’s release of industry GDP shows that Canada’s real output increased 0.2 per cent in November and advanced estimates show that it rose by 0.3 per cent in December. This indicates that the fourth quarter likely rose by 1.5 per cent on an annual basis, higher than anticipated. The net result, when combined with the third quarter data, is a downshift in economic growth in the second half of 2023. Households are facing many challenges due to 22-year high-interest rates. Consumer spending has been flat for two quarters, despite strong population growth, and the unemployment has risen as employment growth has eased in recent months. It’s no wonder that The Conference Board of Canada’s Index of Consumer Confidence reached near lows in November.  

The good news is that interest rates have likely peaked. The Bank of Canada (BoC) has maintained its benchmark interest rate at 5 per cent since September 2023. However, the BoC governor Tim Macklem, has said that it is still premature to shift to cuts, as the most recent inflation report showed Consumer Price Index rose 3.4 per cent on a year-over-year basis in December, following a 3.1 per cent increase in November. Nonetheless, even though a slower economy is expected to persist into the first part of 2024, interest rates are likely going to down in the coming quarters helping consumers regain their footing and provide a boost to the overall economy.

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

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