Statistics Canada reported Tuesday that Canada’s economy didn’t grow at all in the last quarter of 2022, and actually shrank in December.
The three-month slowdown brought an end to five consecutive quarters of growth, and was mostly caused by less spending by businesses and households on various types of investments.
In December, Canada’s total economic output declined by 0.1 per cent from November’s level.
Business spending on machinery and equipment fell by 7.8 per cent in the quarter, the second straight quarterly decline.
On the consumer side, housing investment fell by 2.3 per cent in the quarter, which was the third straight quarterly decline.
After years of torrid growth, Canada’s housing sector cooled off dramatically last year, as buyers and owners digested the impact of the Bank of Canada’s record-setting pace of rate hikes. For 2022 as a whole, housing investment declined by more than 11 per cent.
Stephen Brown, an economist with Capital Economics, said the “stagnation” in Canada’s economic output to finish off 2022 “leaves the economy in worse shape than the Bank of Canada expected.”
Counterintuitively, the weak economic data may come as welcome news to Canada’s central bank, which has been scrambling to try to bring down the country’s inflation rate.
Tuesday’s GDP numbers will likely give the Bank of Canada an excuse to do what it wants to do and keep interest rates where they are at its next policy meeting in March.
“The latest readings on Canadian GDP will allow the Bank of Canada to defend its pause next week with credible evidence that inflation and the economy are slowing,” Desjardins economist Royce Mendes said.