OTTAWA — The Canadian economy outpaced expectations in the final quarter of the year, Statistics Canada said Friday, thanks largely to a surge in household spending.
Real gross domestic product rose 2.6 per cent on an annualized basis in the fourth quarter, the agency said.
That’s well above calls from the consensus of economists polled by Reuters ahead of the release, as well as the Bank of Canada, both of which expected real GDP to rise 1.8 per cent annualized.
Friday’s release also showed the Canadian economy grew 2.2 per cent annualized in the third quarter of 2024, revised up from initial estimates for one per cent growth.
Household spending rose 1.4 per cent in the fourth quarter, the fastest pace in more than two years, StatCan said. Growth was led by purchases of new trucks, vans and sport utility vehicles.
Retail activity was particularly strong in the final month of the year. StatCan said December’s 2.6 per cent growth in retail trade was the biggest jump since June 2021, when in-person shopping restrictions tied to the COVID-19 pandemic began to loosen.
Despite disruptions from the Canada Post strike, the transportation sector bumped higher in December, thanks to a surge in business for couriers and the end of rail and port strikes in November leading to a rebound in growth.
Residential construction also rose at its fastest rate in more than three years in the fourth quarter, the agency said, while drawdowns on business inventories offset growth.
StatCan said real GDP per capita grew 0.2 per cent last quarter. On a per-person basis, the Canadian economy had contracted in five of the last seven quarters, though the agency revised results in the second quarter of 2024 up into positive territory.
StatCan said real GDP rose 0.2 per cent in December and its early estimate calls for growth to slightly accelerate to 0.3 per cent in January.
The latest GDP figures paint a picture of a Canadian economy ticking higher heading into 2025 after a series of interest rate cuts from the Bank of Canada aimed at stimulating growth.
But that trajectory is at risk under threats of tariffs from U.S. President Donald Trump, whose deadlines to impose costly import taxes on Canadian goods near.
"Canada’s economy showed some evident sparks of life in the final quarter of 2024 as it responded to lower interest rates and a sales tax holiday, but that flame could still be extinguished in 2025 if the country faces a tariff wall," Avery Shenfeld, chief economist at CIBC Capital Markets, said in a note to clients.
He said capital spending will likely be restrained in the first quarter because of the uncertainty and a trade war with broad and significant tariffs could "easily snuff out growth."
"That risk could dull market reactions to what was otherwise a better than expected report, and will have the central bank still mulling over a March rate cut if the tariff news goes the wrong way."
This report by The Canadian Press was first published Feb. 28, 2025.
Craig Lord, The Canadian Press
