Canadian Households Just Entered A Lost Decade of Economic Growth

Canada's economy has hit a significant slowdown, faster than anyone expected. Data from Statistics Canada (Stat Can) reveals that the country's real gross domestic product (GDP) grew slower than predicted in the first quarter of 2024, and there was a downward revision for the previous quarter. Combined with rapid population growth, this has resulted in a sharp decline in per-capita real GDP, rolling back to 2014 levels. This situation suggests that Canadian households are facing a lost decade of economic progress.

In the first quarter of 2024, Canada's economy grew at an annualized rate of 1.7%, which is slower than analysts had anticipated. Moreover, the GDP growth for the last quarter of 2023 was revised down to just 0.1%, significantly lower than initially reported.

Nathan Janzen, assistant chief economist at RBC, noted that per-capita GDP has declined for six of the past seven quarters when adjusted for population growth. Although there was a minor upward revision for the first quarter of 2023, breaking a longer trend of decline, the overall outlook remains bleak.

Rising per-capita real GDP typically indicates growing real incomes and improved quality of life. Conversely, a decline means that the same economic output must support more people, which usually leads to a lower quality of life.

The recent drop in per-capita real GDP happened quickly, erasing nearly a decade's worth of economic progress within just a few quarters. This rapid decline has left Canadians facing what can be considered a lost decade, with all progress from the first eight years of the past decade wiped out in the last two years.

Experts attribute this sharp slowdown to heavy reliance on credit-driven growth, such as residential investments and government stimulus. They warn that this period of economic stagnation will not be short-lived and may persist for decades. Despite the economy currently being viewed as "healthy," Canadians should prepare for potentially turbulent times ahead.