On Friday, Statistics Canada reported that Canada’s economy expanded over the fourth quarter of 2024. The pace of growth was swifter than the previous quarter. The Bank of Canada (BoC) began lowering interest rates in June and continued to do so at a relatively aggressive pace over the remainder of the year. Canada’s economy is feeling the impact of these lower rates. The economy was on relatively stable footing ahead of potential tariffs, which are making the outlook a bit murky.

• Canada’s economy expanded at an annualized pace of 2.6% in the fourth quarter of 2024. This outpaced the 1.7% rate of growth economists had expected, based on a Bloomberg survey.
• Third-quarter growth was revised higher to 2.2%, suggesting Canada’s economic activity was stronger than believed in the back half of 2024.
• Consumer spending was the key driver of growth over the quarter. Household consumption rose by 1.4%, its biggest increase since the second quarter of 2022. Subsiding inflationary pressures and lower interest rates lifted consumer confidence and spending over the quarter.
• Canada saw a 1.8% increase in exports, which also contributed to growth, although potential tariffs could weigh on export activity. Growth was also buoyed by a rise in business investment.
• The threat of tariffs looms large. A 25% tariff on Canadian imports and a 10% tariff on energy products is expected.

The second half of 2024 saw relatively strong growth in Canada’s economy. The substantial rate cuts from the BoC appear to be filtering through the economy, boosting consumer and business spending. Exports were another critical driver of stronger growth over the quarter, highlighting the importance of our trade activity and what substantial tariffs could do to harm our economy. Canada’s economy has always faced periods of uncertainty but has ultimately shown its resiliency over time.

If you would like to discuss this economic and market update or have questions about your finances and investments, please feel free to contact me anytime.