National Economy

[Bobert]

A large portion of GDP is just wages. Easiest way to increase those is make labour more scarce...

[MonkeyRonin]

Canadian Government Spending Now 80% of GDP Growth

Daniel Wong
August 30, 2024

Canada’s economy is expanding, but the details are worth reviewing before getting too excited. Statistics Canada (Stat Can) data shows real gross domestic product (GDP) grew more than expected in Q2 2024. A dive into the details shows productivity further eroded on a per capita basis, while household spending weakened. Most growth is now government spending, accounting for a whopping 80% of the quarter. Canada increasingly resembles an economy in recession, despite not quite meeting the country’s preferred definition of one.

Canadian GDP Shows Huge Growth, But 80% Is Now Government

On the surface, Canada’s economy is ripping higher. Annual real GDP growth climbed to 2.1% in Q2 2024, higher than the consensus estimate. It follows 1.8% growth in Q1, which saw an upward revision from the 1.7% originally reported. By itself, this sounds like the economy is just booming. Heck, it even beat expectations—but most readers likely noticed it didn’t keep up with the population.

When adjusted for population, the picture isn’t so rosy. Real GDP per capita declined 0.1% in Q2 2024, with Stat Can noting it was the fifth consecutive decline. Per capita growth fell in 7 out of the past 8 quarters, marking a recession by some definitions.

Canadian Per-Capita GDP Is Negative For A 5th Consecutive Quarter



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Canadian Households Weaken, Spending More On Necessities

Casting further doubts about the economy’s strength are weaker households. Household spending grew 0.2% in Q2 2024, slowing from the 0.9% in Q1. Stat Can attributed the minor growth to rising rents, food, and energy costs. Households spent more on necessities that were not captured in the inflation data, printing “growth.”

Canadian Housing Investment Falls Even Further

Canadian housing investment slowed further despite spending billions in taxpayer stimulus. Residential investment fell 1.9% in Q2 2024, marking the most significant drop in over a year. Leading the decline were new construction (-1.6%), renovations (-2.6%), and ownership transfer costs (-1.1%).

The real estate industry initially expected a boost due to falling borrowing costs. Few signs have since materialized, with those expectations of improvements now pushed to mid-2025.

On the upside, it wasn’t all bad. Canada saw a big improvement in at least one area—inflation.

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Canada may have printed impressive headline growth, but this was not a great quarter. Productivity is on the slide, job vacancies are falling, and unemployment is rising. Real GDP growth was 80% due to rising government consumption, and the rapid expansion of administration is now Canada’s primary job maker. It’s not officially a recession, but excluding aggregate GDP—this is what a recession looks like.

https://betterdwelling.com/canadian-...of-gdp-growth/

[kwoldtimer]

By what definition does declining GDP per capita meet the definition of a recession? I have never heard of such a thing.

[OldDartmouthMark]

Household spending down? No problem, we’ll just spend your tax dollars instead. It’s not like you have a choice…

[Build.It]

That GDP per capita data in the chart above seems to support my personal experience. Recession was mid 2023 to early 2024 and we are now exiting it.

Business was slow in late 2023 and is booming now. Numerous others I know in the construction industry have experienced the same thing.

[YOWetal]

Originally Posted by kwoldtimer

By what definition does declining GDP per capita meet the definition of a recession? I have never heard of such a thing.

There is no such concept. That’s not because per capita GDP doesn’t matter. At the end of the day it’s everything. It’s because it’s rare or possibly unheard of to have massively increased population so rapidly with low productivity people that adds just enough growth to keep growth positive but way below the massive increase in population.

It’s a disaster but it’s possible it avoided a recession this time last year. Cleary it’s created a lot of other problems including a massive change in attitudes to immigration and shortages of everything. If we had decisive action to make net migration close to zero for a few years we could probably recover and return to the previous immigration consensus but it seems that is unlikely from either government.

[ericmacm]

Originally Posted by Build.It

That GDP per capita data in the chart above seems to support my personal experience. Recession was mid 2023 to early 2024 and we are now exiting it.

Business was slow in late 2023 and is booming now. Numerous others I know in the construction industry have experienced the same thing.

I can echo this on the construction front - in my area, this seems to have correlated with when the federal government juiced construction loans for rental housing in late 2023. Housing construction loans for rental projects are now 50-year amortization periods with 10-year terms, with no CMHC loan insurance costs (despite being backed by the CMHC) and no payments to the principal during construction. I suspect that this is also freeing up more capital for non-rental construction too.

There are still lots of notes of recession across other aspects of the economy (consumer spending slowdown, high unemployment, etc) which I don’t think will go away for a very long time.