In Q3 2024, Canada's economy expanded by 0.3 percent, slowing from the 0.5 percent growth observed in the first two quarters of the year. This deceleration reflects challenges across key sectors, with reduced business investments and lower exports offsetting gains from increased household and government spending. Contrarily, GDP per capita fell by 0.4 percent on a quarterly basis in Q3 2024 as Canada continues to experience prominent levels of immigration. While this marks the sixth consecutive quarterly decrease, the fall reflects ongoing population pressures rather than outright economic weakness.

The unemployment rate ticked down slightly to 6.7 percent in November, though it remains elevated as the overall trend is on the rise. This indicates a cooling labour market, with employment growth stagnating and wage pressures beginning to moderate. Despite these trends, wages themselves are still elevated compared to productivity, underscoring tightness in certain sectors (Source).

Inflation, measured by the Consumer Price Index (CPI), hit 1.8 percent in December 2024 on a year-over-year basis and has stabilized near the Bank of Canada’s (BoC’s) 2.0 percent target, reflecting a steady economic environment. Since the COVID-19 pandemic, inflation has been reducing gradually, with no recent signs of a reversal. However, risks remain significant, including lingering supply chain disruptions, Chinese steel and aluminum tariffs, and the potential return of tariffs and trade regulations with President-elect Donald Trump.

Additionally, the BoC implemented its second consecutive fifty basis point cut in December 2024, reducing the policy rate to 3.25 percent. These moves aim to stimulate economic activity amidst headwinds such as potential US trade policy changes and a weakening domestic labour market.

With Trudeau’s recent resignation, Canada is entering a pivotal election year that introduces heightened uncertainty, with implications for public infrastructure spending, federal housing initiatives and shaken investor confidence. These factors, coupled with recent fluctuations in the Canadian dollar, could raise costs for Canadian exporters and complicate the BoC’s efforts to maintain price stability.

Overall, the Canadian economy continues to navigate a period of modest growth with widespread uncertainty. The combination of government investment, gradual monetary easing and relative price stability offers a tentatively optimistic outlook. However, stakeholders should closely monitor developments in international trade, labour market conditions and inflation trends to anticipate possible challenges in the months ahead.