Canada’s Economy Flatlined in Last Quarter of 2022 Following Year of GDP Growth: StatCan

A construction worker works from a lift at a new housing development in Ottawa on Oct. 14, 2022. A new report from Statistics Canada indicates the economy flatlined in the last quarter of 2022. The Canadian Press/Sean Kilpatrick

After nearly five quarters in a row of gross domestic product increases, Canada’s economy flatlined in the last quarter of 2022—expanding at a rate of zero percent with GDP decreasing in December 2022, according to Statistics Canada.

The federal agency writes that “slower inventory accumulations” along with declining amounts of business investments in machinery, equipment, and housing have “offset higher household and government spending and improved net trade.”

However, after a 3.6 percent quarter-to-quarter annualized change of GDP in 2022’s second quarter and a 2.3 percent change in the third quarter, the zero percent change in the fourth quarter went against market expectations, says a senior economist at Toronto-Dominion Bank.

“Canada’s economy ended 2022 with a thud,” wrote James Orlando in a report published on Feb. 28. “Expectations going into this report were for another solid gain. Though we knew housing and non-residential investment were going to pull down GDP, the impact from inventories was huge.”

Besides having a zero percent GDP growth rate, the fourth quarter of 2022 also represented the second straight quarter of the economy growing at a slower pace.

Orlando added that TD is expecting a GDP bounce back in the first quarter of 2023 and said a positive January flash estimate confirmed the expectation.

On a year-to-year basis, Statistics Canada says 2022 was still the second-straight year of real GDP growth for the country “following the COVID-19 pandemic-induced contraction in 2020.”

However, the agency also says that 2022 ended with a “substantially lower” accumulation of manufacturing goods compared to the year’s third quarter, and also that farm inventory accumulation “exhibited a similar slowdown.”

Real business investments also fell in both the year’s third and fourth quarters.

The new figures come after the Bank of Canada lifted its policy rate by 4.25 percentage points since March 2022 to 4.5 percent.

The central bank’s governor, Tiff Macklem, previously said a “severe recession” across Canada would be unlikely in 2023, but added that consecutive quarters of little to no economic growth would be likely.

“We’re just about as likely to have a couple of quarters of negative growth as we are to have a couple of quarters of positive growth, Macklem told the Senate banking committee on Nov. 1.

“It’s not a severe recession. It’s not a major contraction, but you could certainly get a couple of quarters of negative growth.”