Canada’s gross domestic product edged up by 0.1% in November, the same rate of growth as October, as tightened monetary policies continued to slow the economy.
For last three months of 2022, average growth was 1.6% annualized, down from 2.9% in the previous quarter, Statistics Canada reported on Tuesday.
Slower growth largely fell within the expectations of the Bank of Canada and the markets as recent data on sales, production and the labor market indicated.
While the GDP number suggested that the economy has been getting closer to a potential recession, the declines in demand and economic activity will most likely vary across sectors and industries.
A goods recession might have begun as the goods-producing sector posted two consecutive months of declines from October to November. With interest rates remaining restrictive, we should expect the sector to fall further.
On the other hand, the service sector stayed above water, continuing to grow at a solid pace of 0.2% in November.
Looking ahead, manufacturing, management, retail and real estate trade services are now sectors that have the highest risks of falling into a recession because they are highly sensitive to rate hikes.
On the contrary, health care, transportations and professional services have been growing steadily, most likely avoiding a “hard landing” in the coming months.
We are comfortable with our call for a recession as early as the second quarter, yet it would be a mild recession compared to the previous two, barring any unforeseen economic shocks.