Canada’s Economy Grows Less Than Expected in Fourth Quarter, Housing Supports

March 2, 2018 Updated: March 2, 2018

OTTAWA—The pace of economic growth in Canada was less than expected in the fourth quarter, supported by the housing sector ahead of tighter mortgage regulations and making for a more sedate end to a strong year, data from Statistics Canada showed on Friday.

Canada’s gross domestic product grew by an annualized 1.7 percent in the final quarter of 2017, short of economists’ forecasts for 2.0 percent. The third quarter was downwardly revised to 1.5 percent from an initially reported 1.7 percent.

In December, the economy grew by just 0.1 percent, suggesting there was only modest momentum heading into 2018.

Business capital formation grew by an annualized 9.5 percent in the fourth quarter, largely due to investment in residential structures as both resale activity and new housing construction rose.

Some home buyers rushed to make purchases toward the end of last year ahead of new rules that came into effect in 2018 that included “stress tests” to ensure consumers are able to handle higher interest rates.

Businesses also invested more in machinery and equipment, particularly aircraft and other transportation equipment.

Growth in household spending decelerated compared to the previous quarter, while exports picked up on gains in the chemical, forestry and vehicle sectors.

Reporting by Leah Schnurr