Canada's economic outcome in 2022

Canadian GDP growth was quite strong in 2022. Here is a quick review of what happened to production across provinces and territories and industries

The year 2022 was a tumultuous one for Canada’s economy, as for those of many other countries. Demand for consumer goods surged in our neighbour to the south, so much that supply chains could not handle the volume. So inflation began to rage. What happens in the U.S. is usually reflected quickly in Canada as well, so not surprisingly our inflation rate climbed closely behind, although consumer demand did not rise anywhere near as much as in the U.S. In March, the Bank of Canada began a steady sequence of interest rate hikes. World commodity prices also surged as the global economy, experiencing beneficial effects from the COVID-19 vaccines on the pandemic, resumed production. Canada’s international terms of trade improved substantially, led by sky-high energy prices. Our GDP rose rapidly in real terms and even more rapidly in nominal terms thanks to the terms-of-trade gains. Labour markets thrived.

For many purposes, real GDP provides a good summary of the 2022 economic outcome. Table 1 shows the economic growth rate in the year, broken down both by province and territory, and by industry.

The overall growth rate was 3.6%, which was not bad at all. In the ten-year period prior to the COVID-19 year, real GDP growth averaged just 2.3%. Growth was not much different as between the goods- and services-producing industries. The strongest industries were three of the client-facing ones: arts, entertainment and recreation, accommodation and food services, and other services (except public administration). They had been severely hurt by the shutdowns and general cautiousness associated with the pandemic in 2020 and 2021. Agriculture, forestry, fishing and hunting did very well as did transportation and warehousing, the latter reflecting a strong resumption of air travel in particular - so strong, in fact, that some Canadian airports and airlines had trouble coping. The information and communication technology sector also did very well, a good sign, hopefully, for future productivity growth which has been anemic. The relative weak spots include construction, retail trade, finance and insurance, and real estate and rental and leasing, though even these industries experienced some modest growth.

Looked at by province and territory, GDP growth was especially strong in Saskatchewan, Alberta and Manitoba, reflecting very large increases in agricultural output. Weather conditions were very favourable. These provinces, like most others, also had rapid growth in the client-facing services industries mentioned previously. Ontario, British Columbia and Quebec were the provinces recording the strongest growth in the information and communication technology sector.

While the construction industry was relatively weak overall, it boomed west of Manitoba and in Nova Scotia. Construction activity decreased in Newfoundland and Labrador, Ontario, Quebec and Manitoba.

The public sector, comprising public administration and most of health and social assistance and educational services, experienced healthy albeit comparatively moderate growth in all parts of the country.

All told it was an excellent year of economic growth, except in Newfoundland and Labrador where real GDP dropped 1.7%. Looking forward to 2023, no one is expecting anywhere near as good a performance. The federal budget, delivered on March 28, 2023, forecast just 0.3% real growth.