Posthaste: Brace yourself, Canada's economy is weaker than you think

financialpost.com:

Good morning,

When the Bank of Canada held its interest rate steady last week it acknowledged the economy was slowing.

But by how much? The public mostly hears headline economic numbers, but when you look through the lens of population growth an even bleaker picture comes into focus.

A recent report by Desjardins argues that the population boom is masking the full extent of Canada’s economic gloom.

“Surging population growth — the highest since the 1950s — has provided a tailwind to headline economic activity since mid-2022,” said Randall Bartlett, Desjardins’ senior director of Canadian Economics.

The newcomers, who bought cars and home furnishings as they settled in, boosted the economy so that it appeared to “defy the gravitational pull of high interest rates,” he said.

When measured on a per capita basis, however, real gross domestic product has fallen in each of the past four quarters and growth in domestic demand has fared even worse, he said.

Much of the weakness is due to a drop in interest-rate-sensitive sectors like housing, but consumption of non-durable goods like gas and food, and investment in machinery and equipment have also declined on a per capita basis.

Also, the lack of business investment in Canada is alarming, said Bartlett.

An unprecedented number of the newcomers are non-permanent residents, including temporary workers who came to Canada to fill specific labour shortages.

“Instead of investing in productivity-enhancing technology, it appears that businesses have been addressing labour shortages with temporary foreign labour,” he said. This has increased hours worked but lowered productivity.

In fact, data released this month showed that Canadian businesses are less productive now than at any point