Canada’s economy practically grinds to a halt — and nobody saw it coming

Data reveals much bleaker picture than anyone anticipated with weakness extending well beyond the energy sector

Canada’s economy practically came to a halt in the final three months of 2018, in a much deeper-than-expected slowdown that brings the underlying strength of the expansion into doubt.

The country’s economy grew by just 0.1 per cent in the fourth quarter, for an annualized pace of 0.4 per cent, Statistics Canada said Friday from Ottawa. That’s the worst quarterly performance in two and a half years, down from annualized 2 per cent in the third quarter and well below economist expectations for a 1 per cent annualized increase.

While a slowdown was widely expected in the final months of the year due to falling oil prices, it’s a much bleaker picture than anyone anticipated with weakness extending well beyond the energy sector. Consumption spending grew at the slowest pace in almost four years, housing fell by the most in a decade, business investment dropped sharply for a second straight quarter, and domestic demand posted its largest decline since 2015.

The only thing that kept the nation’s economy from contracting was a build-up in inventories as companies stockpiled goods.

At the very least, the numbers suggest that heightened uncertainty — everything from the impact of higher interest rates to potential trade wars and oil-sector woes — has made a real impact on both consumer and business sentiment. The question now is what the weaker-than-expected data suggests about the economy’s ability to rebound back to more normal growth levels.

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