CANADIAN GDP DRIVEN BY PUBLIC SECTOR, PER CAPITA RECESSION DEEPENS
Canada’s economy beat expectations but dive into the details before celebrating. Statistics Canada (Stat Can) data shows real gross domestic product (GDP) grew faster-than-expected in May. However, even with a rapid public sector expansion driving half the advance, it failed to meet population growth. As a result, Canada’s GDP per capita recession printed an 8th consecutive quarter of losses.
Canada’s Real GDP Grew Much Faster Than Forecast
First, the good news—Canada’s real GDP advanced much faster than analysts anticipated. Real GDP grew 0.16% in May, around half the pace seen in April. The monthly advance was significantly larger than Stat Can’s preliminary estimate of 0.1%, coincidentally the same forecast for the upcoming June report.
If correct, the country’s output will be growing even faster than the Bank of Canada (BoC) had forecast. At least when it comes to aggregate growth.
Stat Can’s estimate shows that 15 out of the 20 major sectors expanded in May. Splitting it into the major categories, the smaller Goods (+0.4%) sectors grew much faster than Services (+0.1%). The slowing of the latter is worth emphasizing since it has been driving lofty wage growth, a concern the BoC has expressed.
Canada’s Rapid Public Sector Expansion Fueled Half of GDP Growth
The growth surprise was almost exclusively driven by public sector expansion. Public sector real GDP expanded 0.4% in May, double the rate of the general economy. It was the fifth consecutive month to advance, driven by local, municipal and regional administration.
It’s worth emphasizing just how fast this area is growing. It provided 49% of real GDP growth in the month, an issue often seen in a recession economy. We might not be that far off.
Canadian GDP Per Capita Recession Goes Into An 8th Quarter
Canada’s growth is failing to keep up with the pace of its population, and it’s getting worse. “Indeed, on a per capita basis, GDP declined by 1.0% in the second quarter,” explains Matthieu Arseneau, deputy chief economist at National Bank.
Canada’s Real GDP Per Capita Recession Continues For 8th Quarter
Annualized quarterly growth for real GDP in aggregate and per capita. June estimate included for Q2 2024.
Source: NBF Economics.
The Big Six economist warns that if June’s estimate is confirmed, it would mark the 8th consecutive quarter per capita GDP declined. He further notes that most sectors now look “overstaffed,” setting up the labor market for further weakness.
Story by: Better Dwelling