Much like the global economic landscape, Canada’s economy is constantly in flux. The Gross Domestic Product (GDP) serves as a reliable indicator, providing insights and data into the economic health and prospects of the Canadian economy. 

The most recent figures reveal that GDP increased by 0.4% in January, following a revised 0.3% increase in December 2024. The quarterly report released on February 28th revealed that GDP grew 0.6% in the fourth quarter of 2024. This post provides a greater understanding of Statistics Canada’s latest numbers and their implications for borrowers in the Canadian market.

---

Key Takeaways

• The latest GDP numbers show the Canadian economy increased 0.4% in January.
• In 2024, GDP grew 1.5%.
• Preliminary estimates indicate the economy will remain unchanged in February.

---

Latest GDP Numbers in Canada

Gross domestic product (GDP) measures Canada’s economic activity based on the total value of all goods and services produced in Canada over a specific period. Dividing the total GDP by the population shows how much economic activity each citizen contributes on average, referred to as the GDP per capita. 

When tracked over many years, GDP can show whether Canada’s economy is growing or contracting. When GDP is on the rise, this is a sign of good economic health, while a contracting GDP is a sign that Canada is not working at full capacity or might be heading toward or is already in an economic recession. 

Statistics Canada reported that the Canadian economy increased by 0.4% in January after a revised 0.3% increase in December 2024.

Sectors that saw contractions include:

• The retail trade sector, down 0.9,% was the largest detractor to growth for the month after being the largest contributor to growth in December.

Sectors that saw gains include:

• The mining, quarrying, and oil and gas extraction sector grew 1.8% in January, with the oil and gas extraction subsector contributing the most to growth (+2.6%).
• The manufacturing sector increased 0.8% after 2 consecutive monthly declines. 
• The utilities sector, up 2.7%, was among the top contributors to growth for the second consecutive month. 
• The construction sector increased 0.7%, with residential building construction (+1.4%) being the largest contributor to growth and posting its highest activity level since November 2023.

Statistics Canada’s Q4 GDP data show an increase of 0.6% over the fourth quarter. This data means Canada still does not fit the technical recession criteria, as we would need to see two consecutive quarters of declining growth to fit the definition. 

Higher household final consumption expenditures, increased exports, and business investment drove growth in Q4. However, higher business inventories and imports moderated overall growth for the quarter.

Canada’s Economy Increased 0.4% in January, With Growth Projected to Remain Unchanged in February

January’s GDP increased 0.4%, with 13 of 20 sectors increasing this month. According to Statistics Canada’s preliminary estimate for February, GDP growth is expected to remain relatively unchanged. This advanced estimate is due to increases in the manufacturing, finance and insurance sectors being offset by decreases in the real estate and rental and leasing sectors, oil and gas extraction subsector and retail trade sector.

Housing Investment Increases 

Housing investment, a key driver of the Canadian economy, increased 3.9% in the fourth quarter, the largest quarterly increase since Q1 of 2021. Increases in higher ownership transfer costs (+12.5%) representing resale activity lead to an increase in this quarter. Spending on renovations (+1.5%) and new construction (+2.2%) also rose.

Real Estate Rental and Leasing vs. Home Sales

Household spending rose 1.4% in Q4, the strongest growth since Q2 of 2022. Higher spending on new trucks, vans and sport utility vehicles led to the overall increase, followed by financial services and telecommunication services. 

Household spending was up 2.4% in 2024 compared to 2023, reflecting a 1.6% increase in goods and a 3% increase in services. The most significant contributors to this increase in 2024 were the purchase of new trucks, vans, and sport utility vehicles and expenditures on rent, telecommunication services, and financial services.

Household Spending Increases 

Household spending rose 0.9% in Q3, primarily due to increased spending on new trucks, vans, and sport utility vehicles. Higher spending on financial services also contributed to growth. Spending on accommodation and food services fell, offsetting growth. Per capita expenditures increased by 0.2% in Q3 after falling in 6 of the last 8 quarters. 

The Impact of Rising Bond Yields on Mortgage Rates

With the Canadian economy in a state of uncertainty, bond yields have seen a significant rise, hitting a 16-year high of 4% at the end of August 2023. This rise in bond yields has had a knock-on effect on mortgage rates. Borrowers are faced with higher interest rates, leading to an increased cost of borrowing. 

5-year bond yields have started to come down. They began falling in November 2023, and lenders began lowering rates for fixed-rate mortgages as the yield fell. The 5-year bond yield currently sits around 2.72%.

Frequently Asked Questions

Final Thoughts

The latest GDP numbers paint a complex picture of the Canadian economy. Future rate markets and economists are pricing in an almost 50/50 chance of a rate cut for the April announcement.

With the economy reacting daily to interest rates, this may be the opportune time to get your finances ready if you are looking to purchase a home or renew/refinance your mortgage. Contact our nesto mortgage experts to understand your borrowing capacity and solidify your mortgage strategy.

---