Gross domestic product, income and expenditure, second quarter 2024

Economic

Summary:

Real gross domestic product (GDP) increased 0.5% in the second quarter after rising 0.4% in the first quarter.

Real gross domestic product (GDP) increased 0.5% in the second quarter after rising 0.4% in the first quarter. Higher government final consumption expenditures, business investment in engineering structures and machinery and equipment, and household spending on services in the second quarter were moderated by declines in exports, residential construction and household spending on goods.

On a per capita basis, GDP fell 0.1% in the second quarter – the fifth consecutive quarterly decline.

Government spending rises on higher wages

Government expenditures rose 1.5% in the second quarter, as there were increases in compensation of employees, which is an expense for governments, and hours worked across all levels of government. Purchases of goods and services in the federal as well as in provincial and territorial governments also rebounded in the second quarter from a decline in the first quarter.

Higher business investment in machinery and equipment and engineering structures

Business spending on machinery and equipment increased 6.5% in the second quarter, led by higher spending on aircraft and other transportation equipment and parts. This coincided with increased imports of aircraft and ships.

Business investment in non-residential structures increased 0.5% in the second quarter due to higher spending on engineering structures, primarily in the oil and gas sector. Business investment in non-residential building construction fell 1.2%, as investment in commercial and industrial structures declined.

Business spending on intellectual property products edged up 0.3% in the second quarter, mainly due to increased spending on mineral exploration and evaluation (+4.5%).

Household spending slows in second quarter

Growth in household spending slowed to 0.2% in the second quarter after rising 0.9% in the first quarter. Higher expenditures for rental fees for housing, food and electricity led the increase in the second quarter. Meanwhile, fewer purchases of new trucks, vans and sport utility vehicles as well as reduced expenditures by Canadians abroad tempered overall growth.

Population growth outpaced the increase in household spending in the second quarter, and, as a result, per capita household expenditures fell 0.4% after rising 0.3% in the first quarter.

Weakening net trade, as exports decline more than imports

Exports of goods and services fell 0.4% in the second quarter after rising 0.5% in the first quarter. In the second quarter, lower exports of unwrought gold, silver, and platinum group metals as well as of passenger cars and light trucks and refined petroleum energy products were moderated by higher exports of crude oil and bitumen.

Imports of goods and services edged down 0.1% in the second quarter after recording no change in the first quarter. Lower imports of industrial machinery, equipment and parts, commercial services and refined petroleum energy products led the decrease in the second quarter, while higher imports of passenger cars and light trucks tempered the overall decline.

Residential construction continues to decline, falling in eight of the last nine quarters

Housing investment was down 1.9% in the second quarter, the largest decline since the first quarter of 2023. The decrease in the second quarter of 2024 was driven by lower investment in new construction (-1.6%), as work put in place for single-family dwellings and apartments fell, primarily in Ontario. Renovations fell 2.6%, and ownership transfer costs, which represent the resale market, declined 1.1%, led by less activity in Ontario.

Gross domestic product deflator up on higher prices for services

The GDP deflator rose 1.1% in the second quarter, led by higher prices for household consumption of services.

The ratio of the price of exports to the price of imports—the terms of trade—fell 0.1% in the second quarter as growth in import prices outpaced the growth in export prices.

Compensation of employees rises

Compensation of employees rose 1.6% in the second quarter after increasing 1.5% in the first quarter. Growth in the second quarter was led by increased wages in health care and social assistance, educational services and finance and insurance. Retroactive payments associated with arbitration decisions for members of the Ontario Secondary School Teachers' Federation and Elementary Teachers' Federation of Ontario were a large contributor to the wage growth in educational services. Among all industries, wages and salaries in mining and oil and gas extraction (+5.6%) had the strongest growth in the second quarter.

Household saving rate up on higher wages

The household savings rate reached 7.2% in the second quarter, as gains in disposable income outpaced increases in nominal consumption expenditure. Disposable income gains were mainly from wages and salaries.

Growth in investment income slowed in the second quarter, rising 2.8%, mainly on higher interest received and dividends. At the same time, household property income payments, comprised of mortgage and non-mortgage interest expenses, rose at a faster pace (+5.7%) compared with the first quarter (+4.1%). The Bank of Canada announced a cut to the policy interest rate at the beginning of June, followed by a further cut in July; however, many mortgage borrowers are still facing relatively higher renewal costs following the rate hikes that began in early 2022.

Higher income households tend to earn greater share of investment income than lower income households, while lower income households tend to have interest expenses that represent a greater share of their disposable income.

Corporate incomes

In the second quarter of 2024, total corporate incomes (i.e., gross operating surplus) rose 3.1% after falling 5.6% in the first quarter. In the second quarter, the operating surplus of non-financial corporations rose 3.1%, with gains in the oil and gas extraction sector, while financial corporations surplus rose 2.9%.

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