Latest GDP numbers show Canada’s economy is still growing, but signs of slowdown are everywhere

Canada’s economy expanded slightly in September, with the country’s gross domestic product growing by 0.7 per cent during the third quarter.

Statistics Canada reported Tuesday that exports in goods producing industries led the way during the quarter, offsetting service sector output that was essentially flat.

Oil and gas extraction grew by 1.8 per cent in September, led by a surge in oilsands extraction. The country set a high-water mark for crude bitumen production during the month, ahead of the record-setting output seen in July and August.

Agricultural production also boomed during the month, as crop production grew by 0.7 per cent. Canadian farms have now seen output grow for 12 months in a row after plunging due to drought conditions in Western Canada last year.

“Increased production was largely driven by better growing conditions, leading to higher-than-expected yields,” the data agency said.

Spending slowdown

On the opposite end of the ledger, the manufacturing sector shrank by 0.1 per cent, as did retail and wholesale trade.

Household spending declined by 0.3 per cent, the first decline since the second quarter of 2021. Consumer spending declined because “instead of spending, households continued to save their money for a rainy day,” economist Royce Mendes with Desjardins said. 

The household savings rate increased to 5.7 per cent from 5.1 per cent previously. For comparison purposes, prior to the pandemic, in 2019, the household savings rate was 2.5 per cent.

“It looks like Canadians are readying themselves for what could be a rough ride for the economy in 2023,” Mendes said.

Households were socking away as much as they could during the quarter partly because the wage gains seen earlier in the pandemic are starting to slow. 

On a quarterly basis, nominal compensation for employees rose 1.2 per cent.

“This was the lowest growth in wages and salaries since the second quarter of 2020, when compensation declined sharply,” the data agency said.

All in all, Mendes says the GDP numbers “suggest that economic momentum was stalling entering the fourth quarter.”