Canada’s economy remained stagnant in the final quarter of 2022, and shrank by 0.1% in December, according to Statistics Canada.
This brought an end to five consecutive quarters of growth, and was mainly due to reduced spending by businesses and households on various types of investments.
Business spending on machinery and equipment fell by 7.8% in the quarter, the second straight quarterly decline. On the consumer side, housing investment dropped by 2.3% in the quarter, which was the third straight quarterly decline.
After a period of strong growth, Canada’s housing sector slowed down last year, as buyers and owners adjusted to the impact of the Bank of Canada’s record-setting pace of rate hikes.
For 2022 as a whole, housing investment dropped by more than 11%. Stephen Brown, an economist with Capital Economics, noted that the “stagnation” in Canada’s economic output at the end of 2022 “leaves the economy in worse shape than the Bank of Canada expected.”
The weak economic data may come as welcome news to Canada’s central bank, which has been struggling to lower the country’s inflation rate.
Tuesday’s GDP numbers are likely to provide the Bank of Canada with an excuse to maintain interest rates at their current level during its next policy meeting in March.
Desjardins economist Royce Mendes said that 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.”
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