As whispers of recession loom, Canada’s economic landscape appears bleak with weak GDP performance signaling the need for drastic measures. RBC’s latest report suggests that the country could be heading towards a per-capita recession with consecutive declines raising concerns.
- Canadian Per-Capita GDP Fell 6 Consecutive Quarters
While the overall GDP saw a marginal growth in Q3 2024, the per-capita GDP plummeted by 1.7%, marking the 6th consecutive quarterly decline. This alarming trend paints a grim picture of the economic health of the nation.
Growing apprehensions are fueled by Stat Can’s early estimates for Q4, hinting at continued sluggish growth. The reliance on government spending as a growth factor further exacerbates the predicament.
- Canadian GDP Growth Would Be Non-Existent Without Substantial Government Spending
RBC’s report highlights the precarious reliance on government expenditures for any semblance of growth. As private sector investments dwindle, the disproportionate dependence on public outlay to drive GDP growth is reminiscent of a recessionary environment.
Nathan Janzen, RBC’s assistant chief economist, underscores the concerning trajectory with government expenditure masking a deeper economic malaise. Despite spurts in consumer spending and residential investments, business investments witness a sharp decline, indicating a bleak outlook.
- RBC Forecasting Supersized Rate Cut Despite Other Banks’ Tapering Expectations
In light of the underwhelming economic performance, RBC anticipates a significant rate cut by the Bank of Canada to counterbalance the sluggish GDP growth. The expectation of a 50 basis point cut underscores the severity of the economic predicament.
Diverging from BMO’s more cautious approach, RBC’s foresight aligns with a more interventionist stance to stimulate the economy. While conflicting opinions circulate the market, RBC’s unwavering call for aggressive rate cuts signals a sense of urgency to avert a potential downturn.
As the economic landscape remains shrouded in uncertainty, timely intervention and strategic policy decisions are imperative to navigate the turbulent waters ahead and steer Canada towards sustainable growth.
