But there is more to GDP than consumption. Household spending increased 0.5 per cent from the third quarter, so all those new jobs were indeed creating demand, but not enough demand to offset reduced business spending on inventories, machinery and equipment and housing. Statistics Canada put the annual rate of growth over the final three months of 2022 at 0.0 per cent, compared with a rate of 2.3 per cent in the third quarter.
It will be a rare time that the Bank of Canada welcomes news that the economy has entered a rough patch. Governor Tiff Macklem’s unprecedented series of interest rate increases last year were calibrated to quickly take the heat out of inflation without causing a sharp spike in unemployment.
The Bank of Canada predicted in January that GDP would grow at an annual rate of 0.5 per cent in the fourth quarter, so the economy appears to be unfolding as policymakers thought it would at the start of the year. That guarantees that Macklem will make good on his conditional promise to pause rate increases next week when he makes his next decision on where to set interest rates.
GDP — the combination of consumption, investment, government spending and the net contribution from international trade — grew 3.4 per cent from 2021, pushing the size of Canada’s economy to $2.2 trillion.
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