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Canada's Economy Surprises with 2.6% Annualized Growth in Fourth Quarter

Boosted by consumer spending, construction, and exports, Canada's economy outperformed expectations despite looming trade uncertainties.

A person shops for fruits at a supermarket in Ottawa, Ontario, Canada , March 27, 2023. REUTERS/Patrick Doyle/File Photo
Image
Tapmaster machinist Dawson Meyer works on making parts from raw materials sourced from the United States at the company's manufacturing facility in Calgary, Alta., Tuesday, Feb. 4, 2025. THE CANADIAN PRESS/Jeff McIntosh
Shipping containers are seen at the Port of Montreal in Montreal, Canada, on February 2, 2025. Canada will hit back at US tariffs with 25 percent levies of its own on select American goods, Prime Minister Justin Trudeau said on February 1. "Canada will be responding to the US trade action with 25 percent tariffs against Can$155 billion ($106 billion) worth of American goods," he said in a dramatic tone as he warned of a fracture in longstanding Canada-US ties. (Photo by ANDREJ IVANOV / AFP) (Photo by ANDREJ IVANOV/AFP via Getty Images)

Overview

  • Canada's GDP grew by 2.6% annualized in Q4 2024, surpassing the 1.8% forecast by economists and the Bank of Canada.
  • Household spending rose 1.4% in the quarter, driven by purchases of vehicles, rent, and services, marking its strongest growth since mid-2022.
  • Residential construction saw a 3.9% increase, its largest quarterly rise since early 2021, while business investments grew modestly by 0.7%.
  • Exports of goods and services increased by 1.8% in Q4, led by crude oil, pharmaceuticals, and travel services, though potential U.S. tariffs pose risks.
  • The Bank of Canada may pause further rate cuts after reducing rates by 200 basis points since June 2024, as the economy shows signs of resilience.