Canadian economy not in recession, but 2023 was one of its weakest recent years

Canadian economy not in recession, but 2023 was one of its weakest recent years

The Canadian economy expanded at an annualized rate of one per cent in the fourth quarter as high interest rates weighed on growth, but not enough to push the economy into a recession.

The increase in real gross domestic product (GDP) follows a decline in the third quarter of 0.5 per cent annualized.

Statistics Canada says growth in the fourth quarter was driven by a rise in exports, while housing and business investment both fell.

In December, real GDP was flat as goods-producing industries contracted and Quebec’s public sector workers’ strike weighed on growth.

The federal agency says outside of 2020, economic growth in 2023 rose at its slowest pace since 2016.

WATCH l Retail, transportation, construction firms hit hard by bankruptcies: 

Bankruptcies and insolvencies shot up in 2023

Business insolvencies jumped 41 per cent in 2023, compared to 2022, as pandemic debt and high interest rates collided. Consumer insolvencies are also up, by 23 per cent.

High interest rates have weighed on Canadians’ finances as the Bank of Canada holds its key interest rate at five per cent, the highest it’s been since 2001.

Households continue to renew their mortgages at higher rates, which is causing a pullback in consumer spending and a slowdown in sales for businesses.

Thursday’s report says while consumer spending was up for the quarter, it continued to decline on a per capita basis as the country experiences strong population growth.

A preliminary estimate suggests real GDP grew by 0.4 per cent in January.

Central bank rate decision highly anticipated

The Bank of Canada has signalled that its next move is most likely a rate cut as inflation eases and higher rates dampen economic growth.

Canada’s annual inflation rate ticked down to 2.9 per cent in January amid a broad-based slowdown in price growth.

Most economists expect the central bank to start lowering its key rate around the middle of the year, but a stronger-than-expected economy may reduce the urgency for the central bank to act soon.

The Bank of Canada is set to announce its next interest rate decision on Wednesday.

WATCH l Clothes, fuel prices drop; food prices rising at slower rate: 

Inflation dropped to 2.9% in January

Canada’s inflation rate dropped lower than expected in January — to 2.9 per cent from 3.4 per cent in December, but many consumers say they’re still feeling financial pain.

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