GDP increased 0.3% in the third quarter after rising 0.5% in the second quarter and +0.4 percent in Q1. Economic activity expanded by 1.5 percent compared to the third quarter of 2023, and grew at an annualized rate of 1 percent. Higher household and government spending were partially offset by slower non-farm inventory accumulation, lower business capital investment and less exports

Household spending jumped 0.9 percent, led by increased spending on new trucks, vans and sport utility vehicles. Increased consumption of financial services also contributed to the rise, while spending on accommodation and food services fell. The per capita household expenditures ticked up by 0.2 percent in the third quarter, after falling in six of the last eight quarters.

Business spending on machinery and equipment plunged 7.8 percent in the third quarter, dragged down by lower spending on aircraft and other transportation equipment and parts. This coincided with decreased imports of aircraft and ships, following a big jump in the previous quarter.

The data is in line with the Bank of Cananda's expectation for slower growth in Q3, held back by less business investment, and supports another rate cut in December.

In the July-September quarter, Canada's GDP growth is expected to have lost some steam, growing at an annualized 1.0%. That would be below the 1.5% predicted by the Bank of Canada and way down from 2.1% in April-June, but given recently announced fiscal stimulus and a resilient housing market, the central bank is expected to lower its policy interest rate by 25 basis points at its next meeting on Dec. 11, instead of a larger 50 basis points. The bank trimmed the rate by 50 basis points to 3.75% in October to help ease the pain of its earlier rapid credit tightening after conducting three 25-basis point cuts since June, when it delivered its first rate cut in more than four years.

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.