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Special Report

Canada GDP Research Brief

December 2023

Broad-Based Slowdown Paves Way for Rate Cuts,
Suggesting Investment Recovery in 2024

GDP surprised on the downside. Weaker than expected, Canada’s economy shrank at a 1.1 per cent annualized rate in the third quarter. An outright contraction in non-residential investment, inventory and goods exports was the most prominent contributor for the soft economic activity from July to September. While a large rise in government spending aided a 2.1 per cent gain in total consumption, household consumption flatlined, which suggests that consumer spending per capita continued to contract amid strong population growth. Although a significant upward revision for the second-quarter GDP helped Canada avoid a technical recession, or two consecutive quarters of decreasing output, softening labour market conditions and consumer spending, as well as declining manufacturing sales, all indicate that the nation’s GDP is facing further downward pressure in the final months of 2023.

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