Last Friday, Statistics Canada reported that Canada’s economy expanded in the third quarter of 2024 but at a softer pace than the previous two quarters. Markets had expected the slowdown after monthly gross domestic product reports highlighted meagre economic activity. The Bank of Canada (BoC) began cutting rates in June and hopes the cuts will help stimulate Canada’s economic conditions. This report likely keeps the BoC on pace to cut interest rates again this month.

• Canada’s economy expanded by 1.0%, annualized, in the third quarter of 2024. Third-quarter growth was just below the 1.1% annualized increase economists had expected, based on a Bloomberg survey. Canada’s economy grew at an annualized pace of 2.2% in the second quarter.
• Household and government spending drove the increase. Household consumption picked up as the BoC began loosening financial conditions. After a rough start to the year, retail sales have increased in recent months, providing a glimmer of hope for better days ahead for Canadian households and businesses.
• Third-quarter growth was the slowest since the fourth quarter of 2023. Weak business investment and a drop in net exports offset some of the gains from household consumption.
• A key sector of Canada’s economy has shown improvement in recent months. S&P Global reported that Canada’s manufacturing sector expanded for a third consecutive month in November, benefiting from strong new orders and output.

Markets are expecting another rate cut from the BoC at its December 11 meeting, possibly another jumbo 50-basis-point cut. Economic conditions in Canada have weakened and inflation has come down, warranting some support from Canada’s central bank. This support should help over time despite several risks to the Canadian economy, including potential tariffs from the US.

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.