OTTAWA — Canada's economy dodged a recession in the third quarter of 2024, as gross domestic product rose by 0.6 percent from July through September, according to the latest data released by Statistics Canada on Friday.
The growth figure marks a rebound from the previous quarter, when GDP contracted by 0.5 percent between April and June, narrowly averting the common definition of a technical recession: two consecutive quarters of economic decline. Economists and financial analysts widely use this benchmark to signal a downturn, though some argue it oversimplifies broader indicators like employment and consumer spending.
Statistics Canada reported that the expansion in the third quarter was driven by gains in sectors such as real estate, finance, and insurance, which collectively contributed to the overall uptick. The agency's monthly breakdown showed GDP increasing by 0.2 percent in July, holding steady in August, and climbing another 0.1 percent in September. These figures come amid ongoing challenges including high interest rates and inflation pressures that have lingered since the post-pandemic recovery.
"This is welcome news for policymakers and households alike," said Avery Shenfeld, chief economist at CIBC, in a note to clients following the release. "While the economy isn't out of the woods yet, the positive momentum suggests that the Bank of Canada's rate cuts are starting to take hold."
The Bank of Canada, which has been gradually lowering its key interest rate since June, held steady at 4.25 percent in its latest decision earlier this month. Governor Tiff Macklem has emphasized a data-dependent approach, citing softening inflation and a cooling labor market as reasons for the easing. The third-quarter growth could bolster confidence in further reductions, potentially as soon as the next announcement in December.
However, the report also highlighted uneven performance across the economy. While goods-producing industries saw modest gains, service sectors like retail trade and accommodation experienced slight pullbacks in September. Statistics Canada noted that preliminary estimates for October suggest continued stability, but revisions to earlier months could adjust the quarterly picture.
Contextually, Canada's economic trajectory has been under scrutiny since early 2023, when aggressive rate hikes by the central bank pushed borrowing costs to two-decade highs to combat inflation that peaked above 8 percent. The second-quarter contraction, reported in August, raised fears of a downturn, particularly as per-capita GDP had been declining for several quarters, a metric some experts prefer over the headline figure.
"Per-capita GDP is still in negative territory year-over-year, which tells a more sobering story for Canadians' living standards," observed Pedro Antunes, chief economist at the Conference Board of Canada, in an interview last month. He pointed to population growth outpacing economic output as a key factor, driven by high immigration levels that have boosted the workforce but strained housing and services.
Government officials expressed relief at the data. Finance Minister Chrystia Freeland, speaking at a news conference in Toronto on Friday afternoon, said the results underscore the resilience of the Canadian economy. "We've navigated tough times with strong fundamentals, and this growth shows our strategy is working," Freeland stated, referencing investments in green energy and infrastructure under the federal budget.
Opposition voices, however, were more cautious. Conservative Leader Pierre Poilievre criticized the Liberal government's spending habits during question period in the House of Commons, arguing that the near-miss on recession highlights fiscal mismanagement. "Families are still struggling with affordability while the deficit balloons," Poilievre said, calling for deeper tax cuts to stimulate private-sector activity.
Looking back, the third quarter's performance aligns with forecasts from major institutions. The Bank of Canada had projected around 0.5 percent growth for the period in its July monetary policy report, while the International Monetary Fund recently upgraded its 2024 outlook for Canada to 1.3 percent annual expansion, up from 1.2 percent. These projections factor in anticipated rate cuts and a potential softening in global trade tensions.
Regionally, the data revealed disparities. Ontario and British Columbia led with stronger gains, buoyed by construction and tech sectors, while resource-dependent provinces like Alberta saw mixed results amid fluctuating oil prices. Statistics Canada detailed that mining, quarrying, and oil and gas extraction rose 1.2 percent in September, supported by higher commodity prices.
Consumer confidence, a critical driver of sustained growth, has shown tentative improvement. A recent poll by Nanos Research indicated that 42 percent of Canadians feel optimistic about the economy heading into 2025, up from 35 percent in the summer. Yet, persistent issues like housing affordability— with average home prices hovering near $700,000 nationally—continue to weigh on households.
Experts caution that while the recession scare has passed, vulnerabilities remain. "Global uncertainties, from U.S. election outcomes to geopolitical risks in the Middle East, could disrupt supply chains and energy markets," warned Sal Guatieri, senior economist at BMO Capital Markets, in a research note. He forecasted fourth-quarter GDP growth of 0.4 percent, assuming no major shocks.
As Canada enters the holiday season, retailers are hopeful for a spending boost. The Retail Council of Canada reported early signs of increased foot traffic in October, potentially signaling a virtuous cycle of growth. With the federal election looming in 2025, economic messaging will likely dominate campaigns, as parties vie to claim credit for stability or assign blame for lingering pains.
In the broader North American context, Canada's results contrast with the U.S., where GDP grew 2.8 percent annualized in the third quarter, per preliminary estimates from the Bureau of Economic Analysis. Trade ties mean any U.S. slowdown could ripple northward, though Canada's diversified export base— including autos, energy, and agriculture—provides some buffer.
Looking ahead, Statistics Canada's next release in December will cover the fourth quarter, offering clues on year-end momentum. Analysts like those at TD Economics predict a soft landing, with inflation nearing the 2 percent target by mid-2025 and unemployment stabilizing around 6.5 percent. For now, the third-quarter data provides a sigh of relief in a year marked by uncertainty.
Emily Chen reports from Ottawa for The Appleton Times.