New data from Statistics Canada paints a concerning picture of the Canadian economy. Preliminary estimates suggest zero growth in August, with a tepid 0.3% expansion in September leading to an annualized rate of only 1% for the third quarter of 2024.
Multiple Sectors Feeling the Pinch
The slowdown appears widespread, with notable declines in goods-producing industries and the manufacturing sector. Utilities, wholesale trade, and transportation all experienced stagnant growth in August. The report further highlights shutdowns at Canada’s two largest railways as a contributing factor to the sluggish economic performance.
Weaker Than Expected Growth
These figures fall short of the Bank of Canada’s own forecast of 1.5% annualized growth for the third quarter. This signals a potential deeper economic slump than initially anticipated.
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Interest Rate Relief on the Horizon?
The weaker economic data provides the Bank of Canada with more room to maneuver on interest rates. The central bank has already cut rates by 1.25% since the start of summer, with the latest reduction of 50 basis points occurring in October. The benchmark overnight interest rate now sits at 3.75%.
The Bank of Canada expects its rate cuts to stimulate consumer and business spending, leading to a rebound in the economy by 2025. Their final rate decision for the year is scheduled for December 11th, and with the latest economic data, further cuts remain a strong possibility.
