After three months of decline, the Canadian economy returned to modest growth in July (+0.2% real GDP), thanks to gains in service sectors, and more reassuringly, in goods-producing industries, according to Statistics Canada.\u00a0<\/p>\n
While the mining, oil and gas sector contributed the most to the growth (+1.4%), the pleasant surprise of the month was an 0.7% gain in manufacturing, where companies have been grappling with significant challenges related to U.S. tariffs.<\/p>\n
Statistics Canada\u2019s preliminary estimates showed little growth in August, and the third quarter looks to have ended on a sluggish note.\u00a0<\/p>\n
In the current context, this would still be a commendable performance. It would mean the economy avoided a second consecutive quarterly decline in real GDP (the definition of a technical recession).<\/p>\n
However, as we enter the final quarter of the year, challenges continue to mount. GDP gains will be difficult to achieve in coming months, as uncertainty continues to weigh on business confidence and the U.S. adds new tariffs.\u00a0<\/p>\n
Can households continue to support the economy?<\/p>\n
Strong economic growth depends primarily on consumer spending, which accounts for 60% of GDP year in and year out. In the current economic climate, marked by high uncertainty, consumer demand plays an even more important role. Household confidence in the economy and strong demand for Canadian goods and services are key factors in stimulating business investment and hiring.<\/p>\n
High interest rates in recent years prompted many households to cut back on debt. While debt has been rising slowly since the Bank of Canada began lowering rates, Canadian consumers remain in relatively good financial shape.<\/p>\n
Relative to disposable income, household debt stood at 175% in the second quarter. In other words, for every $1 of available income, households owed $1.75, which remains among the lowest levels of the past decade. This bodes well for continued consumer spending, despite a weak job market.\u00a0<\/p>\n
Additionally, disposable income rose by an average of 3.9% in the second quarter, compared to the previous year. Although down from last year’s annual increase of 5.9%, this was still higher than inflation.<\/p>\n
Lower borrowing costs meant that indebted households had more income available after debt repayment, and Canadians responded by spending that money.<\/p>\n
Bottom line is that households will continue to support the economy, but consumption growth will be timid.<\/p>\n
Further cut in key interest rate in September<\/p>\n
The Bank of Canada has signalled it believes inflation is well under control in Canada and that the risks of a surge in prices remains contained, at least for the time being. This led the bank to lower its key interest rate in September.<\/p>\n
The headline inflation as measured by the Consumer Price Index (CPI) reached 1.9% in August. However, inflation measures favoured by the bank, which are less volatile, remain stubbornly around 3%.\u00a0<\/p>\n
The current economic slowdown, although well established, is not particularly alarming. This suggests the Bank of Canada will remain on the sidelines for now, leaving its key rate steady when it makes its October decision.<\/p>\n
Phew! Employment is on the rise<\/p>\n
In September, 60,400 jobs were created in Canada, after a cumulative loss of 106,000 jobs in the previous two months. A significant portion of the September job gains were generated by the private sector (+22,000 ), which suggests businesses are gradually regaining their footing. In other good news, employment picked up in sectors more vulnerable to tariffs where there have been significant losses since the start of trade tensions. \u00a0<\/p>\n
The unemployment rate has risen rapidly this year due to economic uncertainty, slowing hiring and an increase in the number of potential workers. Despite the job gains in September, the unemployment rate remained at 7.1% as the number of potential workers grew once again.<\/p>\n
In July, the number of job openings fell further to just under half a million, about 15% less than a year ago.<\/p>\n","protected":false},"excerpt":{"rendered":"After three months of decline, the Canadian economy returned to modest growth in July (+0.2% real GDP), thanks…\n","protected":false},"author":2,"featured_media":215601,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[45,49,48,46],"class_list":["post-215600","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-ca","tag-canada","tag-economy"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/215600","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=215600"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/215600\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/215601"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=215600"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=215600"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=215600"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}