The Canadian economy expanded at an annual pace of 1.7% in the final months of 2017 as the more rapid growth seen earlier in the year faded further away, Statistics Canada reported Friday.
The agency’s latest numbers for real gross domestic product showed the economy grew 3% for all of 2017 — a much-stronger pace compared with 2016 when growth was 1.4%.
Growth in the fourth quarter was driven by a 2.3% increase in business investment compared with the third quarter, and a 0.5% quarter-over-quarter rise in household spending, the report said.
Overall, the fourth-quarter came in higher than the third quarter, which was revised down to an annualized rate of 1.5% from 1.7%.
Even with the slowdown, National Bank of Canada senior economist Krishen Rangasamy described the end of 2017 as a decent hand off to 2018.
“With growth like this, you can expect a sharp moderation, which is what we had in the second half of the year,” said Rangasamy, who’s predicting 2.6% growth this year.
“The outlook for 2018 is still positive.”
Other analysts were less optimistic about the months ahead.
BMO chief economist Douglas Porter said the solid contents behind the fourth-quarter report, such as the figures for business investment and housing, gave it a “somewhat rosier glow.”
“The main message, though, is that the exciting growth from the middle of 2016 up until the middle of 2017 is now truly in the past, and the economy is back to the drudgery of slogging out something closer to potential of around 2%,” Porter wrote in a note to clients.
For 2017 as a whole, Statistics Canada said household spending easily made the biggest contribution to growth, followed by inventory and business investment. Exports also grew for the second-straight year with gains in both goods and services.
“Much of this growth was attributable to the first two quarters of 2017, with deceleration observed toward the end of year,” the report said.
The 3% figure for 2017 matches the projection by private-sector economists that was included in the federal budget Tuesday. The budget also predicted real gross domestic product (GDP) growth of 2.2% in 2018 and 1.6% next year.
Craig Alexander, chief economist for the Conference Board of Canada, said the country had the strongest growth in the G7 last year, but is now entering 2018 on a soft note at an increasingly uncertain time.
“This cooling in Canadian growth comes at a time when there are a host of downside risks to the domestic economy from abroad, particularly U.S. trade and tax policy,” Alexander said in a statement, referring to business fears concerns related to the unknowns of U.S. corporate tax cuts and NAFTA’s renegotiation.
The reading on the economy follows a report Thursday by Statistics Canada that foreign direct investment in Canada amounted to $33.8 billion, the lowest level since 2010 and well off the record of $126.1 billion set in 2007.
Conservative MP Pierre Poilievre said Friday that he thinks the economy got a lift last year from temporary factors and he noted there are “ominous signs” ahead due to U.S. uncertainty, slowing growth and weakening investment.
With these issues in mind, he said he had concerns over the projected deficits in the Trudeau government’s recent budget, which include a $18.1-billion shortfall for 2018-19.
“They assumed that a short-term burst of good fortune was permanent and instead of saving up for a rainy day, they’re spending the cupboard bare,” Poilievre said.
Looking back at the first half of 2017, Canadian growth was even stronger than previously thought. On Friday, Statistics Canada revised its real GDP numbers upward for the first and second quarters.
For the first quarter, the estimate was increased to 4% from 3.7%; for the second quarter, revised growth was 4.4%, up from its initial reading of 4.3%.
By industry throughout 2017, the report said the growth was “widespread” with 18 of the 20 sectors showing increases.
Goods-producing industries expanded 4.6%, compared to two-straight annual contractions of 0.5% in 2016 and 1.7% in 2015. The biggest contribution to growth from the goods-producing industries in 2017 came from natural resources extraction, which expanded 7.8%.
Services industries expanded 2.8% last year for their highest pace of growth since 2011. It was led by a 7.5% boost from the wholesale-trade sector.