Canada’s economy gained momentum to finish off 2024, growing at an annualized pace of 2.6 per cent in the fourth quarter to bring full-year growth to 1.5 per cent, Statistics Canada said on Friday.

Despite the strong growth, the economy faces significant risks in 2025, with a United States deadline to impose 25 per cent tariffs on goods and a 10 per cent tariff on energy rapidly approaching.

Economists say the Bank of Canada’s decision to hold or cut its policy rate at its next meeting in March will largely depend on if tariffs are implemented next week. The policy rate currently sits at three per cent.

“The Bank of Canada is expected to hold its policy rate steady — for now,” said Andrew DiCapua, principal economist at the Canadian Chamber of Commerce, in a statement. “But if tariffs emerge, a rate cut is almost certain.”

Bank of Montreal economist Benjamin Reitzes thinks the 2024 data is already old news.

“Unfortunately, most of this was largely before tariff threats really ramped up,” he said, in a note to clients. “If Canada doesn’t get tariffed next week, the Bank of Canada will pause its rate cut campaign at the March 12 meeting.”

Bank of Canada governor Tiff Macklem has warned that damage to the Canadian economy caused by tariffs would be permanent and there would be no “bounceback.” The central bank estimates investment would decline by 12 per cent and exports would decrease by 8.5 per cent, after one full year of a trade war with the U.S. Canadian growth would decrease by three per cent over two years.

An early estimate shows Canada’s economy grew by 0.3 per cent in January, driven by increases in mining, quarrying and oil and gas extraction, wholesale trade and transportation and warehousing.

The main contributor to growth in the quarter was household spending, which rose by 1.4 per cent, the biggest increase since the second quarter of 2022. Residential construction also rose by 3.9 per cent during the quarter, the largest jump since the beginning of 2021.

Exports and imports also rose for the quarter. Exports of goods and services rose by 1.8 per cent, after posting a decline of 0.2 per cent in previous quarter. The rise in exports was driven by increases in unwrought gold, silver and platinum group metals; crude oil and bitumen; and passenger cars and light trucks. Imports of goods and services, meanwhile, increased 1.3 per cent in the fourth quarter, after declines in the previous quarter.

Business investment also rose in the final quarter of 2024, with investment in machinery and equipment posting an increase of 4.2 per cent.

“I think that’s the result of the Bank of Canada decreasing interest rates,” said Tu Nguyen, economist at RSM Canada. “That signals to businesses the cost of borrowing had declined and obviously encouraged businesses to go out and spend.”

The fourth-quarter growth results topped the expectations of the Bank of Canada and economists and the annual growth rate was also above the central bank’s 1.3 per cent forecast.

On a per capita basis, GDP gained 0.2 per cent in the final quarter of 2024, only the second quarterly increase in the last seven quarters. In 2024, GDP per capita fell 1.4 per cent, after a decline of 1.3 per cent in 2023.

Statistics Canada also posted significant upward revisions for growth in the second and third quarters of 2024. Originally, Statistics Canada recorded 2.2 per cent annualized growth in the second quarter, but this has been revised up to 2.8 per cent. Third quarter growth has also been revised up from one per cent to 2.2 per cent. Statistics Canada says the changes were driven by upward revisions to government spending and downward revisions of imports.

• Email: jgowling@postmedia.com

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