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Quebec and Ontario Economic News

Quebec's Real GDP Was Stable in February

May 24, 2023
Hélène Bégin
Principal Economist

Highlights

  • Real GDP was unchanged in February from the previous month. Output in the service industries was flat, and the 0.1% advance in the goods-producing industries wasn't enough to grow the overall economy.
  • Despite a 0.5% rebound in manufacturing and a 1.7% surge in utilities, goods production was dragged down by a 0.7% decrease in construction and a sharp 2.0% decline in mining, oil and gas.
  • Ten of the 15 service sectors posted gains, but these were completely wiped out by the 2.3% drop in wholesale trade.
  • Quebec's economy has stalled and fallen further behind Canada's, which grew a healthy 0.6% in January and 0.1% in February. For the first two months of 2023, Quebec's real GDP was 1.3% higher than in the same months of 2022. Canada's was up 2.8% over the same period.

Comments

As expected, Quebec's real GDP was stable in February. A positive print seemed unlikely given the mixed monthly indicators previously released by Statistics Canada. After a rollercoaster of a year, Quebec ended 2022 on a strong note. But the economy has been sluggish so far this year. Most industries have been up and down for months. Unsurprisingly, the construction sector continues to trend lower, while wholesale trade appears to be in the midst of a major correction. It has posted two meaningful monthly declines in a row (-2.8% in January and -2.3% in February). For the first two months of 2023, wholesale trade is down 8.2% compared to the same period last year. As global supply chains recovered, wholesalers were able to fill up their warehouses. But now that consumer and business demand are slumping, high inventory levels mean fewer wholesale orders.

Implications

A sluggish start to 2022 is entirely consistent with our forecast. It's the precursor to a period of real GDP contraction. Our scenario still calls for a moderate recession this year, which is probably just around the corner. Inventory drawdowns and high interest rates eating into household and business budgets will inevitably slow the economy.