GDP Flat For Third Straight Month In Oct. As Economy ‘Continued To Sputter’: StatCan

Statistics Canada says the economy flatlined once again, with GDP showing no growth in October for the third straight month.

“Canada’s economic engine continued to sputter in the fourth quarter,” said Royce Mendes, Desjardins managing director and head of macro strategy, in a note to clients.

“As more households and businesses feel the impacts of higher interest rates in 2024, we expect Canada to fall into at least a mild recession. So while the economy is sputtering now, it might begin rolling backwards early in the new year.”

StatCan reported services-producing industries edged 0.1 per cent higher in October, while goods-producing industries were unchanged.

It also forecasted that real gross domestic product for November increased 0.1 per cent, with estimated gains in manufacturing, transportation and warehousing, and agriculture, forestry, fishing and hunting partially offset by decreases in retail trade.

Olivia Cross of Capital Economics said the GDP figures were weaker than anticipated, raising the risk that the economy contracted again last quarter “and are another reason to think that the Bank of Canada will soon pivot to interest rate cuts.”

“The big picture is that quarterly GDP growth is very likely to undershoot the Bank of Canada’s forecasts for a 0.8 per cent annualized gain,” she said in a note.

StatCan said that for October, the manufacturing sector declined 0.6 per cent and wholesale trade contracted 0.7 per cent, while retail trade grew 1.2 per cent and mining, quarrying and oil and gas extraction saw a one per cent gain.

It said the transportation and warehousing sector declined 0.2 per cent in October as the St. Lawrence Seaway strike decreased activity in some transportation subsectors.

That included a 3.7 per cent contraction in water transportation, which was down for the first time since the B.C. port strike in July, while trucking transportation was down 0.9 per cent as many trucks poised to carry grain were sidelined during the work stoppage.

CIBC economist Andrew Grantham said while supply issues continue to restrain activity due to events such as the St. Lawrence Seaway strike and the U.S. auto strike, there is also evidence of weak demand.

“Softness in demand will likely persist as more homeowners refinance at higher interest rates, keeping a lid on overall economic activity and seeing inflation decelerate further in 2024, opening the door for a rate cut in Q2 next year,” he said in a note.

Real estate agent and broker activities were down 6.8 per cent in October, the largest monthly decrease since April 2022, as StatCan says a majority of Canada’s largest housing markets continued to cool off.