- Canada’s GDP grew by 2.6% in Q4, exceeding the expected 1.8%.
- Consumer spending and business investments drove the expansion.
- The BoC may pause rate cuts amid stronger economic performance.
Canada’s economy showed resilience in the fourth quarter, defying expectations with a 2.6% annualized growth rate. The boost came from increased consumer spending, business investments, and a rebound in exports.
Despite the positive growth, uncertainty looms as the impact of potential U.S. tariffs remains a concern. The Bank of Canada, which has been easing rates to support growth, may now reconsider further cuts.
Canadian Economy Gains Momentum Amid Policy Shifts
Canada’s economic growth in Q4 2024 surprised analysts, with GDP expanding at an annualized rate of 2.6%. This marked a sharp contrast to earlier concerns of stagnation, as household spending recorded its biggest jump since 2022. Business investments, particularly in machinery and equipment, also contributed to the uptick.
The Bank of Canada had aggressively cut rates over the past year to counter sluggish growth, but the latest data could alter its trajectory. With signs of economic resilience, the central bank may opt to hold rates steady rather than proceed with further cuts in the near term.
Rising residential construction suggests growing confidence in the housing sector, while a rebound in exports supported overall expansion. However, external risks such as U.S. trade policies could still pose challenges, especially if additional tariffs are imposed.
Financial markets responded to the GDP report with a stronger Canadian dollar and higher government bond yields. Investors have now slightly reduced their expectations for another rate cut next month, reflecting a shift in sentiment.
Canada’s economic resilience in Q4 signals a potential turning point, but global trade uncertainties could influence future growth. The BoC now faces a balancing act between stability and stimulus.
“Economy is the art of making the most of life.” — George Bernard Shaw.
