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Canada’s Economy Has Now Stalled Twice. Is Your Emergency Fund Ready?

  Canada’s Economy Has Now Stalled Twice. Is Your Emergency Fund Ready? Canada's economy is losing momentum, and it is a good time to ask yourself an important question: If your income disappeared tomorrow, how long could you cover your bills without borrowing money? Statistics Canada's latest GDP report, released October 30, showed that Canada's economy recorded virtually no growth in August for the second consecutive month. An early estimate suggests economic activity contracted by 0.1% in September. Preliminary figures indicate that the economy grew by just 0.3% during the third quarter, although the official numbers have yet to be released. The slowdown follows a period of economic uncertainty, elevated household expenses and pressure on borrowers. While these figures do not confirm that Canada is entering a recession, they highlight why households should prepare for unexpected financial setbacks. The good news? You do not need a large income to start building a financi...
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Canada’s economy shrinks in Q3 amid export and consumer woes

 


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Canada’s economy shrinks in Q3 amid export and spending woes

Canada’s economy contracted by 1.1 per cent on an annualized basis in the third quarter of 2023, according to Statistics Canada. This was a much weaker result than expected by analysts and the Bank of Canada, which had forecast a slight growth of 0.1 per cent and 0.8 per cent, respectively.

The main factors behind the economic decline were a drop in exports, a slump in business investment, and a stagnation in consumer spending. Exports fell by 5.1 per cent, reflecting lower shipments of energy products, motor vehicles, and aircraft. Business investment decreased by 10.1 per cent, as firms reduced their spending on machinery and equipment, intellectual property, and non-residential structures. Consumer spending was flat, as households saved more of their income amid rising interest rates.

The only bright spots in the third quarter were government spending, which increased by 7.3 per cent, boosted by a one-time GST/HST credit payment, and residential housing investment, which rose by 8.3 per cent, driven by a surge in new construction.

The Canadian economy also performed poorly compared with the U.S. economy, which grew by 5.2 per cent in the same period. Canada has been more sensitive to the impact of higher interest rates, which have been raised by the Bank of Canada to 5 per cent from 0.25 per cent since early 2022. The central bank has recently signalled that it may pause or reverse its tightening cycle, as inflation has eased and economic growth has faltered.

Some economists believe that the third quarter contraction was a temporary setback and that the economy will rebound in the fourth quarter and beyond. Statistics Canada estimated that GDP grew by 0.2 per cent in October, indicating a modest recovery. However, others warn that the economy may face more headwinds in the new year, such as the ongoing supply chain disruptions, the spread of the new COVID-19 variant, and the uncertainty over the federal fiscal policy.

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