Canada Macro Report

Monthly update – November 9, 2023
Economy-wide output unchanged in August

Real gross domestic product was basically unchanged in August for the second consecutive month. Lower factory output was a large drag on activity, down for the third month in a row. Accommodation and food services and retail activity also contracted in August, while higher wholesaling activity and mining, quarrying, and oil and gas extraction offset declines.

Economy-wide output, measured on trend, has been largely unchanged since February, and in August, was 3.4% above pre-COVID levels.

Mining, quarrying, and oil and gas extraction rose 1.2% in August, the third consecutive increase as output rose above levels observed in April, before wildfires weighed on production in late spring. Stronger wholesaling activity in August reflected increases in machinery, equipment and supplies, and coincided with higher import activity.

Factory output was down 0.6% in August, following a 1.1% decrease in July. Food manufacturers, chemical producers and pharmaceutical manufacturers all posted declines while output at auto assembly plants rose for the sixth month in a row. Total factory volumes in August were similar to pre-pandemic levels.

Activity at real estate agents and brokers contracted in August for the second consecutive month following the resumption of interest rate hikes in June and July. Activity at agents and brokers was down 3.8% and was 9% below pre-pandemic levels.

Construction output was unchanged in August after contracting for three consecutive months. After pulling back steadily during the first half of 2023, residential building construction increased for the second month in a row and, in August, was 8% below its pre-COVID benchmark. Repair construction fell for the fourth time in five months, while non-residential building construction was unchanged. Engineering construction declined for the second month in a row after advancing steadily for eleven months.

Retail volumes fell for the third consecutive month in August. Lower activity at motor vehicle and parts dealers contributed to the pullback, while activity also fell at building material and garden equipment and supplies stores, and furniture and home furnishing stores. Volumes in August remained over 3% above pre-pandemic levels.

Accommodation and food services fell 1.8%, offsetting the increase in July. Activity in this sector has trended lower since February and, in August, was 7% below pre-COVID levels.

Air transportation rebounded in August after poor weather conditions impacted activity in June and July. Activity in August was almost one quarter below pre-COVID levels.

Statistics Canada’s advance estimate indicates that real GDP was essentially unchanged in September.

Headline inflation slows as food inflation continues to ease

Headline consumer inflation slowed to 3.8% in September, down from 4.0% in August. September’s deceleration marked the twenty-ninth time in thirty months that the headline rate has been above three percent. Annual price growth excluding gasoline slowed to 3.7%.

Food price inflation continued to ease while prices for many food items remained elevated. Grocery prices were up 5.8% in the twelve months to September, edging below the six percent mark for the first time in 21 months. Meat prices were 4.4% higher than in September of last year, while yearly price increases for fresh vegetables remained below the double-digit mark for the sixth consecutive month. Fresh fruit prices were up 3.0% year-over-year, while increases for pasta products remained in double-digit territory for the eighteenth time in nineteen months. Yearly price increases at restaurants held steady at 6.1%.

Shelter costs, measured year-over-year, rose 6.0% in September, matching the increase in August. Both mortgage interest costs and higher rental prices continued to put upward pressure on inflation. Mortgage interest costs were up 30.6% year-over-year, their fourth consecutive month at or just above the thirty percent mark. Annual price growth for rented accommodation, which reflects both new and existing rental contracts, was 7.1% in September, up from 6.4% in August. Yearly price changes for homeowners’ replacement costs remained in negative territory for the fifth consecutive month.

Employment little changed while the unemployment rate rises

Headline employment was little changed in October (+18,000) as both full-time and part-time employment held steady. Employment increased in construction and in information, culture and recreation, and declined in wholesale and retail trade and manufacturing. Monthly employment gains have averaged 28,000 from February to October.

The unemployment rate increased to 5.7% in October, the fourth monthly increase in the past six months. The unemployment rate among core-age workers edged up to 4.8%, while the rate among youth rose to 11.4%. There were 1.2 million unemployed persons in October, an increase of 171,000 since April.

The overall employment rate—the percentage of working-age persons who are employed—edged down to 61.9% in October as the working-age population continued to expand at a brisk pace (+85,000). The employment rate among 25-to-54-year-olds declined to 84.6% in October.

Average hourly wages rose 4.8% in the twelve months to October, down from 5.0% in September. Total hours worked were unchanged from September to October.

In October 2023, one in three Canadians aged 15 and older was living in a household that had found it difficult or very difficult over the previous four weeks to meet its financial needs in terms of transportation, housing, food, clothing and other necessary expenses.

People living in a rented dwelling were more likely to be in a household experiencing difficulties meeting financial needs (41.3%), compared with those living in a dwelling owned by a household member with a mortgage (36.1%) or without a mortgage (20.0%).

Among Canadians living in dual-earner households with children, 36.1% experienced difficulties meeting financial needs in October. Among single-earner households with children, this proportion rose to 45.5%.