Canada’s Q4 GDP grows by 0.6% driven by household spending and exports

Investing.com -- Canada’s real gross domestic product (GDP) saw a 0.6% increase in the fourth quarter of 2024, following a 0.5% rise in the third quarter. The growth was primarily driven by increased household final consumption expenditures, exports, and business investment. However, higher imports and drawdowns of business inventories moderated the overall growth.

On a per capita basis, real GDP rose by 0.2% in the fourth quarter, reversing a 0.1% fall in the previous quarter. For the full year of 2024, GDP per capita fell by 1.4%, following a 1.3% decline in 2023.

Household spending saw a significant increase of 1.4% in Q4 of 2024, marking the strongest growth since Q2 of 2022. The growth was led by higher spending on new trucks, vans, and sport utility vehicles, followed by financial services and telecommunication services.

In 2024, household spending increased by 2.4% compared to 2023, reflecting increases in goods (+1.6%) and services (+3.0%). On a per capita basis, household expenditures rose by 1.0% in Q4 of 2024, while they fell by 0.6% for the year as a whole.

In 2021, 13.3% of total household final consumption expenditures in Canada were dependent on imports from the United States. This share includes both direct (7.5%) and indirect (5.9%) imports.

Residential construction recorded a 3.9% growth in Q4 of 2024, marking the largest quarterly increase since Q1 of 2021. Despite a strong end to the year, residential construction decreased by 1.1% in 2024, following an 8.5% decrease in 2023.

Business investment in non-residential structures rose by 0.7% in Q4, led by building construction (+1.6%). However, in 2024, business investment in non-residential structures was down by 1.8%, led by a decline in building construction (-3.4%).

Exports of goods and services rose by 1.8% in Q4, after a 0.2% decline in Q3. Imports of goods and services also increased by 1.3% in Q4, following a 0.3% decline in Q3. In 2024, both exports and imports of goods and services rose by 0.6%.

There were widespread withdrawals from non-farm inventories in Q4, led by the manufacturing, wholesale, and retail sectors. On an annual basis, non-farm inventories accumulated at a slower pace in 2024 ($16.4 billion) compared with 2023 ($28.2 billion).

The GDP deflator increased by 0.9% in Q4 of 2024, led by higher prices for Canadian energy exports. In 2024, the GDP deflator rose by 3.0%, after a 1.4% increase in the previous year.

Compensation of employees grew by 1.0% in Q4, a slower pace compared with the 1.7% increase in Q3. In 2024, compensation of employees grew by 5.9%, marking the slowest annual pace since the COVID-19 pandemic-induced shutdowns in 2020.

The household saving rate declined from 7.3% in Q3 to 6.1% in Q4, as growth in disposable income (+1.1%) lagged behind spending (+2.1% in nominal dollars).

Corporate incomes, as measured by gross operating surplus, increased by 4.6% in Q4, after a 0.5% decline in the previous quarter. Despite unprecedented weather-related claims in 2024, gross operating surplus for financial corporations rose by 0.2% in Q4.

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