Economic commentary provided by Alberta Central Chief Economist Charles St-Arnaud.

Bottom line

Today’s release of the monthly GDP shows that economic activity remains sluggish despite some improvement in previous months a preliminary number suggesting higher activity in December. As such, economic activity is estimated to have increased by a meagre +1.8% q-o-q ar in 2024Q4, in line with the Bank of Canada’s expectations in the January Monetary Policy Report. Nevertheless, this would imply another decline in GDP per capita in the fourth quarter.

Moreover, while some of the weakness in November is expected to be temporary (due to work stoppage), the rebound in December remains relatively subdued. While a rebound in retail sales is mentioned as supported for the retail sector, likely due to the GST holiday, it looks like growth in December will be relatively weak once the affected sectors are removed (retail, food and accommodation services). This suggests that growth in Canada could be ending 2024 and starting 2025 with less momentum than indicated by the headline number and the labour market. Moreover, the uncertainty caused by the tariff threat is likely to be a headwind to the Canadian economy in early 2025.

As we said after the latest BoC rate decision, we believe that the general direction for interest rates is lower and that another cut at the March meeting is likely. As we wrote (see Searching for the terminal rate), lower population growth in 2025 and 2026 will be an important drag on the economy, pushing potential growth and the neutral rate lower. This means that at 3.00%, the current policy rate level will become restrictive as population growth slows.

For Alberta, the details available in the report suggest that economic activity likely underperformed the rest of the country in November due to a drop in oil and gas extraction and agriculture activity. Economic activity in the province remains supported by strong population growth and the tailwinds from high oil revenues.

The monthly GDP declined 0.2% m-o-m (+1.5% y-o-y), weaker than the preliminary estimate. The details show that 13 of 20 industrial sectors posted lower activity levels on the month. Statistics Canada notes that work stoppage at ports and Canada Post had an important negative impact on growth in November.

Statistics Canada’s preliminary estimate shows that GDP rose by 0.2% in December. This suggests that growth in the fourth quarter of 2024 is likely to be around +1.8% q-o-q ar., in line with the Bank of Canada’s forecast from the January MPR.

The goods-producing side of the economy dropped 0.6% m-o-m in November. Lower activity in natural resources extraction (-1.6% m-o-m), especially non-conventional oil (-3.4% m-o-m), utilities (-3.6% m-o-m), and manufacturing (-0.3% m-o-m) were the main drag on growth. These declines were partly offset by increases in construction (+0.7% m-o-m).

The services-producing side of the economy eased by 0.1% in November. The decrease came mainly from lower activity in transportation and warehousing (-1.3% m-o-m), finance and insurance (-0.4% m-o-m), retail trade (-0.4% m-o-m), and wholesale trade (-0.3% m-o-m). These declines were partly offset by gains in real estate (+0.3% m-o-m), accommodation and food services (+1.4% m-o-m), and arts, entertainment and recreation (0.8% m-o-m). Statscan notes that the strength in the last tw categories coincides with the Taylor Swift Era tour stop in Toronto.

For Alberta, there is no specific data in the report. However, we can make an assessment based on activity in some key industries specific to Alberta. The drop in oil and gas extraction and agriculture activity suggests that the Alberta economy likely underperformed the rest of the country in November.

 

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Independent Opinion

The views and opinions expressed in this publication are solely and independently those of the author and do not necessarily reflect the views and opinions of any organization or person in any way affiliated with the author including, without limitation, any current or past employers of the author. While reasonable effort was taken to ensure the information and analysis in this publication is accurate, it has been prepared solely for general informational purposes. There are no warranties or representations being provided with respect to the accuracy and completeness of the content in this publication. Nothing in this publication should be construed as providing professional advice on the matters discussed. The author does not assume any liability arising from any form of reliance on this publication.