Rosenberg Research Says Canada's Q4 GDP Offers Plenty to "Debate" About

09:57 AM EST, 03/02/2026 (MT Newswires) -- There was both good and bad in Friday's Canadian gross domestic product data, said Rosenberg Research, adding that at the margin, however, still more of the latter and less of the former.

The economy contracted at a 0.6% annual rate in Q4, slightly worse than the 0.2% consensus decline forecast, noted Rosenberg Research. The Q3 number was nudged down to a 2.4% annualized growth pace from the initial 2.6% estimate. This marks the second decline in real economic activity over the past three quarters and dragged the year-over-year trend down from 3.1% a year ago, to 1.6% as of Q3, and now to a "microscopic" 0.7% rise.

This is the weakest pace since Q1 2021, when the world thought the COVID-19 pandemic would never end and the Bank of Canada was pinning the policy rate near the zero bound, pointed out Rosenberg.

The consumer rebounded to a 1.7% annual rate in Q4 after slipping 0.8% in Q3 -- a decent rebound, but averaging out the two quarters reveals a soft underbelly to the household sector. The services sector saved the day with a big 3.6% annualized gain, which more than offset a 0.9% annual rate decline in goods-related expenditures -- now in a recession of its own after having contracted by 1.6% in Q3.

The housing sector resumed its downtrend, faltering at a 4.4% annual rate, while non-residential outlays fell at a 3.2% annual rate and are also back in a recession.

If there was a bright light, it was that business capital expenditure recovered at a nice 12.3% rate after even bigger declines over the prior two quarters. Net exports were a nice surprise in terms of contribution, which served as an antidote to inventory liquidation. No doubt the macro bulls will point to the fact that after having slipped by 0.5% in Q3, real final domestic demand rebounded at a 2.4% annualized clip to round out the year, added Rosenberg.

A lot of that domestic demand growth came from the government sector, which added nearly 1.5 percentage points to the headline number. As such, the private sector actually shrank at over a 2% annual rate in Q4.

The good news is that the monthly December number for real GDP did beat expectations, coming in at 0.2% month over month instead of 0.1% as was widely expected. While there was widespread strength across many categories, what did emerge as sources of concern were very weak results for some areas very closely tied to the consumer: air travel was down 0.4%, and there were flat readings in real estate, restaurants/accommodation, and the retail sector.

Statistics Canada penciled in zero monthly growth for January, which tainted the positive "hand off" from December's momentum and likely means that Q1 real GDP growth would do well to even achieve a 1.0% annual growth rate, according to Rosenberg. That, in turn, would take the year-over-year real GDP trend down even further to less than 0.5%.

This economy needs help, and the fact that the Bank of Canada has been pushing on the proverbial string since it first embarked on its easing course back in the spring of 2024 only means that it has used up more of the policy bullets left in the chamber, noted Rosenberg. Not to mention the fact that the BoC's most recent projection of a 1.8% annual rate rise for real GDP now looks to be very stale and out-of-date at this point.

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