Canada’s economic growth slowed to 1.6% in the fourth and final quarter of 2022 as the impact of higher interest rates took hold across the country.
The Q4 growth was half the increase seen in the previous third quarter of 2022, according to Statistics Canada.
The Ottawa-based agency said that preliminary data shows Canada’s gross domestic product (GDP) was flat in December. That followed 0.1% gains in both November and October of last year.
For all of 2022, Canada’s economy expanded 3.8%, which was close to the Bank of Canada’s estimate for 3.6% growth.
The data shows that higher interest rates to cool overheated inflation are slowing economic activity and impacting consumer spending.
A majority of economists forecast a recession in Canada during the first half of this year. A recession is defined as two consecutive quarters of economic contraction.
The Bank of Canada has indicated that it now plans to hold its trendsetting overnight interest rate at its current level of 4.5% as it assesses the state of the economy.
In Q4, growth in services-producing industries was offset by a decline in the goods sector.
Construction activity dropped 0.7%, with new construction of single detached homes and home improvement leading the decline.
Accommodation and food services contracted 1.4% on lower activity in bars and restaurants. And retail trade decreased 0.6% in the quarter, with the food and beverage subsector falling to its lowest level since April 2018.
Official economic data for December and the fourth quarter of 2022 will be released by Statistics Canada on February 28.
