Choose your settings

Choose your language
Economic News

Canada: Real GDP in November Saw a Downside Surprise

January 31, 2025
LJ Valencia
Economic Analyst

Highlights

  • Canadian real GDP fell by 0.2% in November 2024, following a 0.3% growth in the prior month. This was a tick below the consensus of economic forecasters and the Statistics Canada flash estimate. Thirteen of 20 subsectors posted declines. See Table 1 for further details.

  • The flash estimate points to real GDP growth of 0.2% in December (graph 1). This would imply a 1.8% annualized gain in real GDP by industry in the fourth quarter of 2024.

Implications

November 2024’s real GDP decline reflected weakness mainly in goods-producing sectors. Under the hood, the economy saw decreases in resource extraction and utilities. Resource extraction fell due to lower levels of oil and gas extraction and weaker mining activity. The utilities sector contracted mainly due to lower demand for heating in parts of central and eastern Canada. On the services side, transportation and warehousing experienced the largest monthly decline since December 2022. This was a result of adverse weather during the month, as well as the postal workers’ and port workers’ strikes dragging down transportation activity, much of which should unwind in December.

 

That being said, it’s not all bad news in November. The real estate, rental and leasing sector rose for a seventh consecutive month on the back of higher home sales activity in Ontario, Quebec, and British Columbia. The construction sector increased for a fourth consecutive month, supported by higher activity in residential and non-residential construction. Several leisure-related industries also expanded in November, coinciding with Taylor Swift’s Eras tour in Toronto.

 

Looking ahead to December, the recent Labour Force Survey External link. showed a surge in job gains, with most industries experiencing employment growth. Indeed, employment grew faster than population in December for the first time since early 2024 and to the greatest extent since January 2023. But regardless of these developments, real GDP continues to lag population growth (graph 2).


Our latest outlook for real GDP by expenditure shows growth slightly above the Bank of Canada’s (BoC) Q4 projection of 1.8% in the January Monetary Policy Report (MPR), at 2.0%. Our analysis External link. suggests that as a result of the TMX, crude oil exports and production may increase more prominently in the final quarter of 2024. When combined with an ongoing rebound in auto production in Q4 and the new fiscal stimulus measures External link., our view is that there may be some upside risk to the BoC’s real GDP growth forecast in the fourth quarter. And despite limited data in the first quarter of 2025, momentum so far in Q1 suggests a similar advance.

 

The BoC announced a modest 25-basis point rate cut External link. earlier this week, citing inflation consistently at or below its 2% target, modest economic growth, and uncertainty regarding the threat of US tariffs. Given the possibility of tariffs on US import from Canada, planned slower population growth and the impending wall of mortgage renewals, we expect the BoC to pursue additional cuts totalling 75 basis points through 2025, to end the year at 2.25%. However, a full-blown trade war could lead to the policy rate falling faster and further (see also our latest Economic and Financial Outlook External link. for more details).

NOTE TO READERS: The letters k, M and B are used in texts, graphs and tables to refer to thousands, millions and billions respectively. IMPORTANT: This document is based on public information and may under no circumstances be used or construed as a commitment by Desjardins Group. While the information provided has been determined on the basis of data obtained from sources that are deemed to be reliable, Desjardins Group in no way warrants that the information is accurate or complete. The document is provided solely for information purposes and does not constitute an offer or solicitation for purchase or sale. Desjardins Group takes no responsibility for the consequences of any decision whatsoever made on the basis of the data contained herein and does not hereby undertake to provide any advice, notably in the area of investment services. Data on prices and margins is provided for information purposes and may be modified at any time based on such factors as market conditions. The past performances and projections expressed herein are no guarantee of future performance. Unless otherwise indicated, the opinions and forecasts contained herein are those of the document’s authors and do not represent the opinions of any other person or the official position of Desjardins Group.