Posthaste: This cratering GDP number has only ever been seen during a recession (2024)

Canada’s February gross domestic product numbers were disappointing in more ways than one.

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Statistics Canada data released Tuesday showed the economy grew 0.2 per cent for the month — below analysts’ estimates of 0.3 per cent and StatsCan’s own advanced forecast of 0.4 per cent — revealing an economy that is losing steam.

However, the reading that put economists most on edge wasGDP per capita.

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The closely watched measure continued to crater and is now down three per cent from its peak in September 2022, according to Matthieu Arseneau, deputy chief economist at National Bank of Canada.

“A decline of this magnitude has never been recorded outside of a recession,” Arseneau said in a note following the GDP release. He estimates first quarter annualized GDP per capita currently stands at -1.2 per cent, and at -0.3 per cent non-annualized.

GDP per capita was also on the Royal Bank of Canada‘s radar.

Weaker-than-expected GDP coupled with Statistics Canada’s forecast for flat growth in March, “leaves output for Q1 as a whole tracking (by our count) a seventh consecutive per-capita decline,” RBC economist Claire Fan said in a note.

Fan said the bank estimated GDP per capita declined 0.5 per cent in the first quarter from the fourth quarter of 2023.

GDP per capita matters because “it is an indicator of the average standard of living of the population,” Arseneau said in an email. “Higher population growth naturally leads to better economic growth.”

Not this time around.

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Economists have credited Canada’s record population increase with keeping the economy out of technical recession territory, defined as two consecutive quarters of negative growth. However, on a per-person basis there has been “significant underperformance,” Arseneau said.

Some think that the economy is already in recession based on GDP per capita.

Jimmy Jean, chief economist at Desjardins Group, said in an interview with the Financial Post’s Larysa Harapyn at the end of February that “when you look at things (GDP) on a per-capita basis, the Canadian economy is, for all intents and purposes, in a recession.”

Despite expected annualized growth of 2.5 per cent for the first quarter that many economists attributed to one-off events, falling GDP per capita is only one sign of a flailing economy, the National Bank of Canada economist said.

“This ‘solid’ growth during the quarter did not prevent the unemployment rate from rising, another sign that economic growth was below potential during the quarter,” Arseneau said.

Canada’s unemployment rate hit 6.1 per cent in March, up from 5.7 per cent in January.

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National Bank is currently calling for the jobless rate to rise to seven per cent by the end of the year.

Other examples of the underlying weakness include the deceleration in the rate of inflation.

Over the last three months, the Bank of Canada’s two preferred measures of core inflation were “running at an annualized pace at the lower end of the central bank’s target range” of one per cent, Arseneau said.

These factors should add up to the Bank of Canada cutting rates this summer, with the economist warning that not doing so could risk economic damage.

“This overly restrictive monetary policy is reflected in our gloomy economic outlook for the coming quarters,” with growth for the year barely registering at 0.6 per cent, Arseneau said.

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The Canadian economy lost momentum in February as it grew at a slower pace than both analyst expectations and Statistics Canada’s previous prediction, increasing the pressure on the Bank of Canada for a potential interest rate cut in mid-2024. — Naimul Karim, Financial Post

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• Gildan Activewear Inc. holds its annual general meeting where activist shareholder and U.S. investment firm Browning West LP will push to have its full slate of 12 directors installed on the board of the T-shirt manufacturing company in a move aimed at reinstating founder Glenn Chamandy as chief executive.
• The Teamsters Canada Rail Conference will hold a press conference to announce the results of strike votes at Canadian National and Canadian Pacific Kansas City.
• Bank of Canada governor Tiff Macklem appears before the Standing Senate Committee on Banking, Commerce and the Economy starting at 4:15 p.m. EDT.
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Today’s Posthaste was written by Gigi Suhanic, with additional reporting from Financial Post staff, The Canadian Press and Bloomberg.

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