Canada’s economy is facing challenges as the gross domestic product (GDP) per capita continues to fall, alarming economists. In February, the economy grew at a slower pace than expected, with GDP increasing by only 0.2 per cent, below both analysts’ estimates and Statistics Canada’s forecast.
The most concerning factor for economists is the decline in GDP per capita, which has dropped by three per cent from its peak in September 2022. This decline is unprecedented outside of a recession, according to Matthieu Arseneau, deputy chief economist at National Bank of Canada. He estimates that the first quarter GDP per capita is currently at -1.2 per cent annualized.
Royal Bank of Canada also noted the decline in GDP per capita, with economist Claire Fan stating that the first quarter saw a seventh consecutive per-capita decline. The economy’s performance on a per-person basis has been significantly underperforming, despite record population growth.
The weakening economy is also reflected in rising unemployment rates, which hit 6.1 per cent in March, up from 5.7 per cent in January. National Bank is predicting the jobless rate to rise to seven per cent by the end of the year.
Given these challenges, economists are calling for the Bank of Canada to start cutting rates to stimulate economic growth. Failure to do so could risk further economic damage, with National Bank economist Arseneau warning of a gloomy economic outlook for the coming quarters. The bank is forecasting growth for the year to barely register at 0.6 per cent.
Overall, the falling GDP per capita and other economic indicators point to a struggling economy that may require intervention to prevent further decline.