Biannual Update on The Canadian Economy: Third and Fourth Quarters of 2019

(Disponible en français : Bilan semestriel de l’économie canadienne : les troisième et quatrième trimestres de 2019)

This HillNote presents selected indicators in relation to the Canadian economy, and highlights key trends covering the third and fourth quarters of 2019. Over that period, Canadian real gross domestic product (GDP) continued to grow, but at a lower rate than during the second quarter of the year, primarily due to a decrease in business investment and the trade balance. The unemployment rate remained under 6% in the last two quarters of 2019 and employment grew at a slower rate than during the first two quarters of 2019.

Real Gross Domestic Product Growth

Figure 1 shows that the annualized growth in real GDP slowed to 1.1% in the third quarter of 2019 and 0.3% in the fourth quarter. The fourth quarter of 2019 was the lowest annualized growth rate since the second quarter of 2016, a period during which wildfires in Fort McMurray, Alberta significantly reduced oil output and exports. According to Statistics Canada, real GDP grew 1.6% in 2019, compared with 2.0% in 2018.    

Figure 1 – Annualized Quarter-Over-Quarter Real Gross Domestic Product Growth, Canada, First Quarter 2015–Fourth Quarter 2019 (%)

Figure 1 shows the annualized growth in real gross domestic product on a quarterly basis from the first quarter of 2015 until the fourth quarter of 2019. Over this period, the highest quarterly growth rate occurred in the third quarter of 2016 at 4.4% while the lowest quarterly growth rate occurred in the first quarter of 2015 at -2.2%. Growth in the real gross domestic product slowed to 1.1% in the third quarter of 2019 and 0.3% in the fourth quarter of 2019.

Note: Real gross domestic product (GDP) at market prices (measured in contributions to percentage change, annualized) was calculated by Statistics Canada and is based on the quarterly average of monthly data.
Source: Figure prepared by the authors using data that is adjusted for inflation and seasonal fluctuations obtained from Statistics Canada, Table 36-10-0104-01, “Gross domestic product, expenditure-based, quarterly, Canada (dollars x 1,000,000),” accessed 6 March 2020.

Real Gross Domestic Product Components

As shown in Figure 2, one of the main factors that led to the slowing of real GDP growth in the third and fourth quarters of 2019 was a decrease in the value of exports, which removed 0.2 and 1.7 percentage points from real GDP growth in these two quarters, respectively.

An increase in the value of business investment added 1.5 percentage points to real GDP growth in the third quarter of 2019; a decrease in the fourth quarter removed 0.6 percentage points from real GDP growth.

Household consumption growth slowed in the second quarter of 2019, but subsequently increased, resulting in additions of 1.1 and 1.2 percentage points to real GDP growth in the third and fourth quarters, respectively.

Figure 2 – Points of Percentage Contributions to Real Gross Domestic Product Growth, By Component, Canada, First Quarter 2019–Fourth Quarter 2019 (%)

Figure 2 shows contributions to gross domestic product percent changes by gross domestic product components for the four quarters of 2019. The contribution of household consumption was 1.4% in the first quarter, 0.2% in the second quarter, 1.1% in the third quarter and 1.2% in the fourth quarter. The contribution of government spending was 0.7% in the first quarter, 0.2% in the second quarter, 0.5% in the third quarter and 0.1% in the fourth quarter. The contribution of business investment was 1.0% in the first quarter, -0.3% in the second quarter, 1.5% in the third quarter and -0.6% in the fourth quarter. The contribution of investment in inventories was 1.9% in the first quarter, -1.4% in the second quarter, -1.8% in the third quarter and 0.6% in the fourth quarter. The contribution of exports was -1.3% in the first quarter, 3.3% in the second quarter, -0.2% in the third quarter and -1.7% in the fourth quarter. The contribution of imports was -2.8% in the first quarter, 1.4% in the second quarter, 0.1% in the third quarter and 0.8% in the fourth quarter.

Note: Household consumption includes consumption by non-profit institutions and business fixed investment includes investment by such institutions.
Source: Figure prepared by the authors using data that is adjusted for inflation and seasonal fluctuations obtained from Statistics Canada, Table 36-10-0104-01,Gross domestic product, expenditure-based, quarterly, Canada (dollars x 1,000,000),” accessed 17 March 2020.

Inflation

Figure 3 shows the evolution of Consumer Price Index (CPI) inflation in terms of average quarterly data. Between the first quarter of 2015 and the fourth quarter of 2019, CPI inflation fluctuated within the Bank of Canada’s inflation target range of 1% to 3%. The CPI inflation rate in the fourth quarter of 2019 was 2.1%, up from 1.9% in the third quarter.

Figure 3 – Year-Over-Year Change in Consumer Price Index Inflation and the
Bank of Canada’s Inflation Target Range, First Quarter 2015–Fourth Quarter 2019 (%)

Figure 3 shows the evolution of Consumer Price Index (CPI) inflation in terms of average quarterly data from the first quarter of 2015 until the fourth quarter of 2019. The CPI inflation rate in the fourth quarter of 2019 was 2.1%, up from 1.9% in the third quarter of 2019. Over this period, the highest rate of inflation occurred in the third quarter of 2018 at 2.7% while the lowest rate of inflation occurred in the first and second quarters of 2015 at 1.0%.

Note: The Consumer Price Index inflation rate calculations are based on average quarterly data.
Source: Figure prepared by the authors using data obtained from Bank of Canada, Historical Data – Inflation (year-over-year percentage change), accessed 6 March 2020.

Total, Full-Time and Part-Time Employment Growth

Total employment growth was 1.1% and 0.5% in the third and fourth quarters of 2019, respectively. During this period, almost all new jobs were full-time. In the fourth quarter, approximately 15.5 million people had full-time jobs, and 3.6 million had part-time employment.

Figure 4 – Annualized Quarter-Over-Quarter Total, Full-Time and Part-Time Employment Growth, Canada, First Quarter 2019–Fourth Quarter 2019 (%)

Figure 4 shows that, in 2019, annualized quarter-over-quarter growth of total employment was 3.0% in the first quarter, 2.6% in the second quarter, 1.1% in the third quarter and 0.5% in the fourth quarter; that annualized quarter-over-quarter growth of full-time employment was 2.3% in the first quarter, 2.8% in the second quarter, 1.3% in the third quarter and 0.7% in the fourth quarter; and that annualized quarter-over-quarter growth of part-time employment was 6.1% in the first quarter, 1.5% in the second quarter, 0.4% in the third quarter and -0.3% in the fourth quarter.

Source: Figure prepared by the authors using seasonally adjusted data obtained from Statistics Canada, Table 14-10-0287-01, “Labour force characteristics, monthly, seasonally adjusted and trend-cycle, last 5 months,” accessed 17 March 2020.

Annual Unemployment Rates by Age Group, Sex and Indigenous Status

In 2019, the Canadian unemployment rate for the total population was 5.7%, a 10 basis points decrease compared to 2018.

However, in 2019, the unemployment rate differed significantly by age group, sex and Indigenous status. For example, Indigenous youth aged 15 to 24 experienced higher levels of unemployment, at 16.6%, relative to the non-Indigenous population aged 15 to 24, at 10.8%. Moreover, the unemployment rate for Indigenous men aged 15 to 24 was 17.3% in 2019, compared to 15.7% for Indigenous women aged 15 to 24.

For the Indigenous population aged 25 to 54, the unemployment rate was 9.9% for males and 6.7% for females in 2019, compared to 4.8% for non-Indigenous males aged 25 to 54 and 4.4% for non-Indigenous females aged 25 to 54.

Figure 5 – Annual Unemployment Rates, Total and by Age Group, Sex and Indigenous Status, Canada, 2019 (%)

Figure 5 shows the annual unemployment rates in Canada by age group, sex and the Indigenous population in 2019. Across all age groups and sexes, Indigenous unemployment rates are higher than the rates for the non-Indigenous population. For the group aged 15 years and older, the unemployment rate for the entire Canadian population was 5.7%. The rate for the Indigenous population was 10.1% and for the non-Indigenous population was 5.5%. For the group aged 15 to 24, the rate amongst Indigenous youth is 16.6%. The unemployment rate for Indigenous male youth was 17.3% and the rate for Indigenous female youth was 15.7%. For the group aged 25 to 54, the rate amongst Indigenous population is 8.3%. The unemployment rate for Indigenous male population was 9.9% and the rate for Indigenous female was 6.7%.

Note: Statistics Canada does not publish quarterly data on the unemployment rate by Indigenous status.
Source: Figure prepared by the authors using seasonally adjusted data obtained from Statistics Canada, Table 14-10-0364-01, “Labour force characteristics by province, region and Aboriginal group,” accessed 6 March 2020.

Variation in Exchange Rates

Over the June to December 2019 period, the value of the Chinese renminbi and euro both decreased by 2.5% relative to the value of the Canadian dollar, while the relative value of the Japanese yen and the U.S. dollar decreased by 1.7% and 0.9%, respectively. The value of the U.K. pound sterling relative to the value of the Canadian dollar increased by 2.5% over the same period.

Figure 6 – Variation of Selected Exchange Rates, June to December 2019 (%)

Figure 6 shows, over the June to December 2019 period, the variation in the value of the following foreign currencies relative to the Canadian dollar: an increase of 2.5% for the U.K. Pound Sterling, an increase of 0.9% for the U.S. Dollar, a decrease of 1.7% for the Japanese Yen and a decrease of 2.5% for both the euro and the Chinese Renminbi.

Note: The exchange rate represents the amount of Canadian dollars needed to purchase one unit of foreign currency. For example, an increase of 5% in the U.S. exchange rate would represent an increase of 5% in the value of the U.S. dollar relative to the value of the Canadian dollar.
Source: Figure prepared by the authors using data obtained from Statistics Canada, Table 33-10-0163-01, “Monthly average foreign exchange rates in Canadian dollars, Bank of Canada,” accessed 17 March 2020.

Authors: Andrew Barton and Michaël Lambert-Racine, Library of Parliament