Quarterly economic and trade report – Q3 2024

Highlights

The global economy grew 2.4% in Q3 2024 relative to previous quarter, but at a slower pace than in Q2 (2.8%). Growth in advanced economies was stable, rising 2.0% in Q3 on the strength of the U.S. economy, while growth in emerging markets slowed to 3.1%, down from 3.7% in Q2.

Canada’s real GDP decelerated to 1.0% (annualized) in Q3, after rising 2.2% in Q2. Growth in household and government spending was offset by a decline in business investment and inventory accumulation, and net exports.

Canadian exports fell 0.5% in Q3, with goods and services falling 0.4% and 0.8%, respectively. The decline was due to lower unwrought gold, cars and light trucks and travel services exports. Imports of goods and services edged up 0.1%.

In its January 2025 Monetary Policy Report, the Bank of Canada projected Canadian GDP growth of 1.3% in 2024 and 1.8% in 2025. While these forecasts do not include the imposition of potential tariffs, the Bank believes that these threats are already partially factored into financial markets and business decisions.

Table 1: Highlights – Third Quarter 2024

Notes: *GDP is quarterly changes at annualized rates. YTD is year-to-date; it compares the data available for the current year to the same quarters of the previous year.
Source: Oxford Economics, Netherland Bureau for Economic Analysis, Statistics Canada.

Emerging economies decelerate, advanced economies stabilize

The global economy grew at an annual rate of 2.4% in Q3 2024, down from 2.8% in Q2. Emerging economies led the slowdown, falling from 3.7% to 3.1%. Advanced economies grew at a similar pace (2.0%).

The U.S. posted a solid growth (2.8%) in Q3, led by consumer spending and a surge in exports. Although inflation remains somewhat elevated, employment and wages have increased, and the unemployment rate remains low (4.1% in December).

France's economy expanded 1.6% in Q3, boosted by the Olympics. Germany returned to growth (+0.4%) in Q3, driven by private and government consumption, after contracting 1.1% in Q2. The UK economy decelerated in Q3, growing 0.6% compared to 1.8% in Q2.

China’s economy continued to decelerate in Q3 (2.8%), from 4.5% in Q2, weighing on emerging economies growth. Exports were down, especially for IT equipment. However, industrial production was resilient, supported by high-tech industries, and retail sales rebounded, partly due to the used-goods exchange program launched in early 2024. Other major emerging economies also decelerated in Q3, such as India (3.0%) and Russia (2.7%).

Figure 1 – Real GDP growth, top economies (quarterly % change, annualized)

Global trade volumes remain strong in Q3 2024

In Q3 2024, world merchandise trade volumes remained steady, rising 0.8%, which included a temporary surge in August.

Japan (4.0%) and the U.S. (3.0%) led export growth among advanced economies, with Japan’s exports boosted by semiconductors’ sales to Asian markets and the U.S. by autos, consumer goods, and capital goods in August. China’s export volumes fell 0.8%, as telecommunication equipment, electronics, and computers contracted.

Imports by advanced economies grew 1.1%, again led by the U.S. (3.3%) and Japan (4.3%). In the U.S., higher demand for semiconductors and computers to support the construction of data centers and the boom in artificial intelligence (AI) prompted retailers to build inventories. Emerging economies’ imports rose 0.8%, led by Asia (excluding China) and by Eastern Europe, both rising 2.1%. China’s imports were down 0.9%.

World industrial production rose 0.6% in Q3, with the increase coming entirely from emerging economies (1.1%), while it fell 0.1% in advanced economies. Industrial production declined in the U.S. (-0.2%) and in the euro area (-0.4%). Growth in the emerging economies was led by China (+1.6%), boosted by the high-tech sector, Latin America (+1.1%) and Africa and Middle East (+1.0%).

Figure 2 – World merchandise trade and industrial production volume (Index 2021 = 100)

Economic uncertainty in the medium term

In January 2025, the IMF forecast global GDP growth at 3.2% in 2024 and 3.3% in 2025. The IMF sees a deepened divergence in economic performance, with robust U.S. activity driven by domestic demand (consumption and investment), while momentum wanes among other advanced economies.

Euro area growth is expected to be modest, at 0.8% in 2024 and 1.0% in 2025, due to geopolitical tensions, low consumer confidence and the persistence of energy price shocks (gas prices are twice as high as pre-pandemic). The IMF forecasts a 0.2% contraction in Japan in 2024, owing to temporary supply disruptions.

Emerging and developing economies may expand 4.2% in 2024 and 2025, driven by China and India. In China, despite ongoing weakness in the real estate sector and lack of consumer confidence, growth is projected to slow only marginally to 4.8% in 2024, supported by net exports.

However, the level of uncertainty surrounding the outlook in 2025 is high. Newly elected governments could introduce significant changes to trade and fiscal policies and further intensification of geopolitical tensions could weigh on trade and investment and undermine the resilience of supply chains.

Figure 3 – Global forecasted GDP growth (annual % change)

Canadian Economic activity slowed in Q3 2024

After a strong start to the year, Canada’s real GDP slowed to 1.0% (annualized) in Q3. Higher spending by household and government was offset by slower business inventory accumulation and investment, and lower exports.

Consumer spending (+3.5%) was the largest contributor to growth in Q3, led by spending on new trucks, vans and sport utility vehicles. Government expenditures (+4.5%) increased for the third consecutive quarter, across all levels of government.

Residential investment rose 3.0%, the first increase in a year, due to higher home resale activity, as new construction (-0.1%) and spending on renovations (-0.4%) fell.

On the other hand, business investment was a notable drag on growth in Q3, as spending on machinery and equipment (-27.7%), especially on aircraft and other transportation equipment and parts, were down.

Exports of goods and services fell faster than imports in Q3. As a result, net trade contributed negatively to GDP. 

Figure 4 – Real Canadian GDP growth (quarterly % change, annualized)

Services sectors led Canadian GDP growth

Economic growth in Q3 was driven by services-producing industries (+0.5%), while goods-producing industries contracted 0.4%. Growth was broad-based, with 12 industries contributing.

On the services side, the public sector (+0.8%) was the largest contributor to overall growth, with all 3 components expanding (educational services, health care and social assistance, and public administration). Finance and insurance (+1.2%) and real estate (+0.6%) increased in Q3, due to interest rate cuts in July and September. Utilities rose 1.8%, due to a warmer-than-usual summer, which increased the demand for cooling.

On the goods-producing side, manufacturing fell 1.5% in Q3, the largest drag on growth for the 3rd consecutive quarter. Durable goods manufacturing faced broad-based declines in most sub-sectors, such as machinery and transportation equipment manufacturing. Non-durable goods manufacturing was also down, with chemical manufacturing contributing the most to the decline, and mining, quarrying & oil and gas extraction fell 0.5%.

*GDP by industry can differ slightly from GDP by expenditure in the last slide.

Figure 5 – Canada’s GDP* at basic prices by industry for Q3 (quarterly % change)

Exports of goods and services edged down in Q3

Goods and services exports fell 0.5% in Q3 2024, with 5 out of 11 goods and 3 out of 4 services categories declining.

Among the export sectors that experienced growth, consumer goods (+4.2%) and transportation services (+3.9%) were the largest contributors, largely offset by lower exports of motor vehicles and parts (-4.9%), falling for the 5th consecutive quarter. The decline in Canadian auto production coincides with a slowdown in U.S. production. Also contributing to the decline were exports of travel services (-2.7%) and government services (-2.4%).

Imports inched up 0.1% in Q3 2024, but growth was uneven, with 6 of the 11 goods and 3 of the 4 services categories expanding. The increase in metal and non-metallic mineral products (+6.4%) was mainly due to higher imports of copper from Sweden. Consumer goods (+3.0%), and chemical, plastic & rubber products (+2.7%) grew in Q3, but this was almost entirely offset by contractions in motor vehicles and parts (-5.1%), and aircraft and parts (-14.4%). Services imports were up 1.9%, mainly due to travel services (spending by Canadian travellers abroad) and commercial services.

Figure 6 – Canada’s international trade by product (Q3 2024, quarterly % change)

Growth in goods exports to China and European Union in Q3

Although exports of aircraft and unwrought gold to the U.S. increased in September, this was offset by sharp declines in energy exports in August and in motor vehicles and parts in July, reflecting a slowdown in U.S. production. Imports of motor vehicles and parts from the U.S. also declined in July, following events such as flooding in the southern U.S. and seasonal shutdowns of auto manufacturing plants. Goods exports to the U.S. fell at a slightly slower pace (-1.0%) than goods imports in Q3 (-1.8%), leading to a marginally increased trade surplus with the country.

Exports to China grew faster than imports, due to a surge in Canadian canola exports in August. Meanwhile, in the European Union, both exports and imports of goods were up in Q3.

Goods exports to the rest of the world decreased 1.7% in Q3, and gold exports remain volatile, especially to the UK. Meanwhile, imports from the rest of the world rose 2.1%, led by imports from Switzerland (various products) and the UK (motor gasoline) in July. In August, higher imports of unwrought gold from Switzerland were partially offset by lower imports of passenger cars and light trucks from South Korea (July) and Mexico (August). 

Figure 7 – Canada’s goods trade, by major trading partner (Q3 2024, quarterly % change)

Services imports from the U.S. and China on the rise in Q3

Canadian services exports fell 0.8%, while imports rose 1.9% in Q3. Travel led the decline in services exports, with drops in both the number of visitors from the U.S. (-1.3%) and from the rest of the world (-4.7%). Commercial services exports (-0.6%) also contributed to the fall, led by R&D services (-7.8%).

Travel drove the rise in services imports. The number of Canadians traveling abroad grew 0.8%, driven by travel to countries other than the U.S. (+5.8%).

Exports of services to the U.S. (-0.1%) and China (0.0%) were virtually unchanged, while imports from both countries expanded – by 1.6% from the U.S. and 1.2% from China.

Services exports to the European Union were robust (+2.4%), led by exports to France (+7.3%), Germany (+3.1%) and the Netherlands (+5.4%). Meanwhile, services imports from the EU decreased 2.3%, mainly from Italy (-9.9%) and France (-4.7%), narrowing the trade deficit with this region.

Service exports to the rest of the world fell 2.8%, due to a sharp drop in exports to India (-9.9%), with a lower number of students coming to Canada in Q3 (-5.5%). On the other hand, services imports from the rest of the world rose strongly (+4.6%).

Figure 8 – Canada’s services trade, by major trading partner (Q3 2024, quarterly % change)

Canadian economy expected to strengthen in 2025

In its January Monetary Policy Report, the Bank of Canada lowered its forecast for GDP in 2025 to 1.8%, from 2.1% in its previous report in October 2024. Growth in 2025 will be propelled by lower interest rates and higher incomes, which should boost household spending. Increased oil and gas transportation capacity from the Trans-Mountain Pipeline will continue to support export growth, along with an LNG export terminal due to come online in the spring.

The Bank’s 2025 forecast did not incorporate the imposition of tariffs, but it estimated that these threats are already partially factored into financial markets and business decisions. However, the report featured a modelling scenario where the U.S. imposes 25% tariffs on all the goods it imports, including from Canada, and its trading partners fully retaliate. The results produced higher inflation and lower growth in both Canada and the U.S.

Note: Following a historical revision of Statistics Canada's national economic accounts data starting in 2021, GDP in 2023 has been revised upward from 1.2% to 1.5%. The largest revisions were to business investment and consumer spending.

Figure 9 – Canadian forecasted GDP growth (annual % change)

Annex: Tables

Table 1: Canadian trade by industry sector ($ millions)

Note: “Q/Q %” is the change from the previous quarter; “Y/Y %” is the change from the same quarter the previous year.
Sources: Statistics Canada Table 36-10-0019-01 & 36-10-0021-01. Balance of payments basis, seasonally adjusted.

Table 2: Canadian goods trade by trading partner ($ millions)

Notes: The Indo-Pacific region total includes only the 9 markets for which data are available. “Q/Q %” is the change from the previous quarter; “Y/Y %” is the change from the same quarter the previous year.
Source: Statistics Canada, Table 36-10-0023-01. Balance of payments basis, seasonally unadjusted.

Table 3: Canadian services trade by trading partner ($ millions)

Notes: The Indo-Pacific region total includes only the 9 markets for which data are available. “Q/Q %” is the change from the previous quarter; “Y/Y %” is the change from the same quarter the previous year.
Source: Statistics Canada, Table 12-10-0157-01. Balance of payments basis, seasonally unadjusted.