Annualized GDP growth stalled in the fourth quarter, while Econoday's consensus had anticipated a 1.5 percent expansion. GDP was also unchanged on a quarterly basis following five consecutive increases.

Slower inventory accumulation, lower investment in machinery as well as housing weakness dragged down activity in the fourth quarter, while household and government spending supported growth.

Investments in inventories trimmed the annualized GDP growth by 5.61 percentage points. Business investment cut GDP growth by 1.04 percent points, including 1.04 for machinery and equipment alone, which dropped 7.8 percent over the quarter. Housing investment, which contracted 2.3 percent in the fourth quarter (8.8 percent annualized) amid higher borrowing costs, trimmed annual GDP growth by 0.75 percentage points.

On the upside, household final consumption, which was up 0.5 percent on the quarter (2.1 percent annualized), added 1.08 percentage points to the annualized GDP. Government spending, up 2.4 percent on an annualized basis, added 0.51 points. Overall final demand was up 0.3 percent in the fourth quarter (1.0 percent annualized), recovering the 0.2 percent decline (0.8 percent annualized) recorded the previous quarter.

On the external front, exports rose 0.2 percent in the fourth quarter and imports fell 3.2 percent.

The unrounded annualized GDP growth was 0.032 percent in the fourth quarter.

In 2022 as a whole, real GDP growth slowed to 3.4 percent from 5.0 percent in 2021. Higher prices in the first and second quarters contributed to an 11.0 percent increase in nominal GDP.

Today's weaker-than-expected GDP performance will reinforce the Bank of Canada's willingness to hold off on any additional rate hikes for now, especially since the central bank had projected 1.3 percent growth in the fourth quarter. In addition, Econoday Consensus Divergence Index, at minus 27, is now indicative of an economy that is appreciably weaker than expected.

A 1.5 percent annualized growth rate is the consensus for Canadian fourth-quarter GDP versus 2.9 percent expansion in the third quarter.

Gross domestic product (GDP) is the broadest measure of aggregate economic activity and encompasses every sector of the economy. There is no quarterly flash estimate and the first report is typically not issued until around the end of the second month after the reference period. This has the advantage of limiting the size of any future revision and also accommodates the inclusion of the GDP expenditure components.

GDP is the all-inclusive measure of economic activity. Investors need to closely track the economy because it usually dictates how investments will perform. Stock market Investors like to see healthy economic growth because robust business activity translates to higher corporate profits. The GDP report contains a treasure-trove of information which not only paints an image of the overall economy, but tells investors about important trends within the big picture. Unlike the U.S., Canada produces only one estimate per quarter once full data are available for all components. Most production reports that lead to Canadian GDP are released before the official GDP number. Therefore, actual GDP figures usually confirm expectations. However, an unexpected release can move markets due to the significance of the figure.

GDP components such as consumer spending, business and residential investment, and price (inflation) indexes illuminate the economy's undercurrents, which can translate to investment opportunities and guidance in managing a portfolio.

Each financial market reacts differently to GDP data because of their focus. For example, equity market participants cheer healthy economic growth because it improves the corporate profit outlook while weak growth generally means anemic earnings. Equities generally drop on disappointing growth and climb on good growth prospects.

Bond or fixed income markets are contrarians. They prefer weak growth so that there is less of a chance of higher central bank interest rates and inflation. When GDP growth is poor or negative it indicates anemic or negative economic activity. Bond prices will rise and interest rates will fall. When growth is positive and good, interest rates will be higher and bond prices lower.

Robust GDP growth signals a heightened level of economic activity and often a higher demand for the domestic currency. At the same time, economic expansion raises concerns about inflationary pressures which may prompt monetary authorities to increase interest rates. Thus positive GDP readings are generally bullish for the Canadian dollar, while negative readings are generally bearish.