The Canadian economy grew slightly in November and looks to have stalled further at the end of the year as higher interest rates began to slow spending.
Statistics Canada’s preliminary estimate for real GDP in December indicates the economy stayed flat, suggesting the economy grew at an annualized rate of 1.6 per cent in the fourth quarter of last year.
In comparison, the economy grew at an annualized rate of 2.9 per cent in the third quarter of 2022.
The stalled growth comes after the economy grew by 0.1 per cent in November, the federal agency said Tuesday.
Growth in real domestic product for the month was driven by the public sector, transportation and warehousing and finance and insurance.
Statistics Canada’s report notes that the removal of COVID-19 travel restrictions have spurred growth in transportation and warehousing.
Meanwhile, construction, retail and accommodation and food services contracted.
The housing market was the first to feel the effects of interest rate hikes, leading to a slowdown in housing-related sectors.
That slowdown is expected to extend to other sectors in the economy as higher borrowing costs force consumers and businesses to pull back on spending.
The Bank of Canada raised its key interest rate for the eighth consecutive time last week and said it was taking a conditional pause, keeping the door open to further rate hikes if inflation isn’t tamed.
Statistics Canada estimates that for 2022, the economy grew by 3.8 per cent.
Looking ahead, many economists are anticipating a mild recession in 2023. However, the economy is expected to recover in the second half of the year.