Canada: Q4 economic output shrinks, but outlook improves for Q1 – TD Securities

TD Securities Predicts Slight GDP Decline in Q4, Brighter Prospects Ahead

According to TD Securities’ Global Strategy Team, Canada’s real GDP is projected to shrink at an annualized rate of 0.4% in the fourth quarter. This downturn is mainly attributed to subdued domestic demand, reduced spending on household goods, and a slowdown in the housing market. These negative factors are expected to be partially balanced by increased government expenditures and positive net exports.

Q4 Weakness Offset by Stronger Q1 Expectations

The team anticipates that the fourth quarter’s GDP contraction will be driven by ongoing softness in domestic demand. Household goods consumption is likely to decline for a second straight quarter, following a 2.0% drop in Q3. While spending on services may see a slight uptick, weaker housing activity is expected to continue weighing on residential investment.

Government outlays are forecasted to be the primary source of resilience in Q4, complemented by a favorable impact from net exports.

Looking ahead, the outlook for December is more optimistic, with industry-level GDP expected to rise by 0.2%, largely due to robust performance in the services sector.

Preliminary estimates for January suggest ongoing modest growth of 0.1% to 0.2%, which would help establish a stronger foundation for economic expansion in the first quarter.

(This report was generated with assistance from an AI tool and subsequently reviewed by an editor.)