The Canadian economy recorded an annualized growth of 1% in the fourth quarter, with high interest rates impacting growth but not enough to push the economy into recession. This follows a 0.5% annualized decrease in the third quarter, according to Statistics Canada.

Growth Factors and Challenges

Growth in the fourth quarter was driven by an increase in exports, while investment in housing and business both declined. Real GDP remained stable in December as goods-producing industries contracted and public sector strikes in Quebec impacted growth.

Expert Opinions and Future Prospects

BMO's Chief Economist, Douglas Porter, states the economy is "progressing" thanks to strong spending trends in the US, boosting Canadian exports. However, he notes that growth is still sluggish, especially when expressed on a per capita basis, with real GDP per capita down by more than 2% from last year.

The federal agency notes that excluding 2020, economic growth in 2023 has increased at its slowest pace since 2016. High interest rates have weighed on Canadian finances as the Bank of Canada maintains its key interest rate at 5%, the highest level since 2001.

Impact on Consumers and Businesses

Households continue to renew their mortgages at higher rates, leading to a withdrawal from consumer spending and a slowdown in business sales. Despite an increase in consumer spending over the quarter, it has continued to decline per capita as the country experiences strong demographic growth.

Conclusion

The current economic situation poses challenges but also opportunities for the Bank of Canada to navigate towards more stable growth. Patience will be key for future rate adjustments.