Canadian real GDP was largely unchanged in June, following a 0.1% increase in May. Goods-producing sectors fell 0.4 per cent, the largest decrease since December 2023. Meanwhile, services-producing industries were up 0.1 per cent, marking a third consecutive monthly increase. Manufacturing (-1.5 per cent), wholesale trade (-0.7 per cent), and construction (-0.6 per cent) were the main drivers of downward pressure on real GDP growth. These decreases were offset by growth in the public sector, finance and insurance, utilities, and real-estate sectors. Preliminary estimates suggest that real GDP by industry was also largely unchanged in July.

Real GDP growth in the second quarter of 2024 registered 2.1 per cent at an annualized rate from the prior quarter, rising for the third consecutive quarter. Growth was driven by increased government spending (+1.5 per cent) and business investment in machinery (+6.5 per cent), while household spending was essentially flat (+0.2 per cent) in spite of strong wage growth. As a result, the household savings rate rose to 7.2 per cent. Rapid population growth outpaced modest gains in household spending, leading to a 0.4 per cent decline in per capita household expenditures. Resulting GDP per capita growth was down 0.1 per cent in Q2 and marked a fifth consecutive quarterly decline. Housing investment fell 1.9 per cent in the second quarter, primarily due to lower investment in new construction (-1.6 per cent). Overall, residential construction has fallen for eight of the last nine quarters.

Fairly strong GDP growth in the second quarter, which surpassed the Bank of Canada's expectations, is largely driven by public sector expenditure. However, Canadian GDP per capita continues to struggle amidst rapid population growth. This comes in the context of continually improving inflation, which hit 2.5 per cent last month, with price appreciation being largely driven by high shelter costs. Employment has continued to soften from the previous quarter, with the unemployment rate hitting 6.4 per cent last month. Considering these components, markets expect the Bank of Canada to continue cutting rates during its announcement next week. 

Copyright British Columbia Real Estate Association. Reprinted with permission.