In the third quarter of 2024, Canada's real gross domestic product (GDP) increased by 0.3%, marking a slowdown from the 0.5% growth experienced in both the first and second quarters of the year. The GDP rise was tempered by a range of factors, including a slower accumulation of non-farm inventories, a reduction in business capital investment, and a decrease in exports.
Despite the overall GDP growth, on a per capita basis, the country saw a decline of 0.4%, continuing a downward trend for the sixth consecutive quarter. However, household spending emerged as a leading growth factor, climbing 0.9% in the third quarter, with notable increases in the purchase of new trucks, vans, and sport utility vehicles, as well as financial services. This rise comes after a period where per capita household expenditures had fallen in six of the previous eight quarters, though they edged up by 0.2% in the latest quarter.
Government expenditures also contributed to economic activity, increasing by 1.1% and marking the third successive quarter of growth since a decrease in the fourth quarter of 2023. This uptick was consistent across all levels of government.
The pace of inventory accumulation by businesses moderated, with a $18.5 billion increase in non-farm inventories, a deceleration from the $27.8 billion seen in the previous quarter. The retail motor vehicles sector and manufacturing of durable and non-durable goods were key areas where inventory growth slowed.
Investment by businesses in machinery and equipment saw a significant drop of 7.8%, particularly in aircraft and other transportation equipment and parts. This coincided with a decrease in imports of such items. Conversely, business investment in intellectual property products rose by 1.4%, with research and development and mineral exploration and evaluation spending going up by 4.2% and 3.0%, respectively.
In the housing sector, investment increased by 0.8%, the first expansion since the third quarter of 2023, primarily driven by higher ownership transfer costs, which reflect resale activity. This contrasted with declines in spending on renovations and new construction.
Exports of goods and services decreased by 0.3%, with significant reductions in unwrought gold, passenger cars, light trucks, and travel services. Imports also edged down 0.1%, led by lower imports of passenger cars, light trucks, and other transportation equipment.
The GDP deflator, which reflects the overall level of prices, rose by 0.6% due to increased prices for government and household expenditures. However, a decline in export prices contributed to a further decrease in the terms of trade.
Employee compensation saw a rise of 1.7%, with the finance, real estate, company management, and educational services sectors leading the way. This increase was partly attributed to the new collective bargaining agreements in Quebec and Ontario. Regionally, Prince Edward Island, Quebec, and New Brunswick (NYSE:BC) saw the highest gains in employee compensation, while Yukon experienced a decline due to the closure of a major gold mine.
Household net saving improved, with disposable income growing at twice the rate of spending, partly due to wage increases and a decrease in interest payments on mortgages and consumer credit. This was influenced by the Bank of Canada's policy interest rate cuts totaling 75 basis points from June to September 2024, with additional cuts announced in October. As a result, the household saving rate hit a three-year high of 7.1%.
Corporate income, on the other hand, fell by 1.1%, with the motor vehicle industries within the manufacturing, wholesale, and retail sectors leading the decline. Despite this, the oil and gas extraction and petroleum manufacturing sectors experienced growth due to increased output. Financial corporations saw a gross operating surplus increase of 0.9%, despite weather events impacting the surplus of property and auto insurance companies. Banking sector income rose as falling interest rates widened the spread between loans and deposits.
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