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Economic News

Canada: Q4 Real GDP Release Is Less Positive Than It First Appears

February 29, 2024
Randall Bartlett
Senior Director of Canadian Economics


  • Real GDP growth advanced by 1.0% in Q4. This was slightly better than the consensus of economic forecasters (0.8%) but well above the Bank of Canada’s more dour outlook (0.0%). See Table 1 for further details.
  • Monthly real GDP was flat in December, coming in below consensus (0.2%) and Statistics Canada’s flash estimate (0.3%). Statistics Canada expects real GDP by industry to advance by 0.4% in January 2024. Assuming real GDP growth is unchanged in February and March, this would put Q1 2024 growth in real GDP by industry at 1.8% annualized. 


Headline GDP was more positive than economists had anticipated. And growth not only came in above expectations in the final quarter of 2023, but Q3 was revised up materially higher as well, though that was partly offset by a an also significant negative revision to Q2. For the year as whole, real GDP advanced by 1.1% in 2023.

The details of the release were less rosy. Final domestic demand contracted in Q4, as a modest advance in consumption was more than offset by a substantial drag from investment, particularly business investment (graph 1). The latter is disheartening considering the urgency to boost productivity. Overall domestic demand has been just about stagnant on average since the middle of 2022, underscoring the effectiveness of the Bank of Canada’s tightening. Trade was the bright spot in the quarter, adding much more to growth than was offset by the drag from domestic demand and a drawdown in inventories. Turning to incomes, corporate profits were solid while compensation of employees slowed from Q3. Regardless, the households saving rate remained at a respectable 6.2% to end the year.

Looking ahead, the positive monthly real GDP data for January point to an acceleration in growth in the first quarter of 2024. We’re currently tracking annualized real GDP growth in the range of 1% to 1.5% in Q1, well above the 0.5% annualized pace forecasted by the Bank of Canada in its January 2024 Monetary Policy Report (MPR).

The upward revision to Q3, beat on Q4, and better-than-projected tracking for Q1 2024 suggest the Bank of Canada will need to increase its growth forecast in the next MPR. The output gap is likely to be less negative as a result. On balance, this should be more inflationary. But with January CPI inflation slowing more than expected, the signals from the Canadian economy have been muddied.

Decent growth and slowing inflation is the sweet spot. However, the lackluster details under today’s release make clear that the Canadian economy is struggling more than the headline would suggest. Real GDP per capita also continues to decline on the back of surging population growth, moving further below its pre-pandemic level in Q4 (graph 2). Consumer and business surveys point to further weakness ahead as well, as sentiment remains soft. Taken together, we don’t think today’s real GDP release moves the needle much on rate cuts beginning in Q2 2024.

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.