Quarterly economic and trade report: Q4 2024

Highlights

• The world economy grew by 3.4% (annualized) in Q4 2024, the fastest quarterly increase of the year, and was driven mainly by China. Meanwhile advanced economies, particularly the Eurozone and the United Kingdom, saw slower or stagnant growth.
• Global merchandise trade volumes rose by 0.7% in Q4 2024, marking the sixth consecutive quarterly increase. However, global trade and economic growth might slow in 2025 due to heightened political and policy uncertainty.
• Canadian GDP saw notable growth in Q4 (2.6% annualized), driven by higher consumer and business spending. However, economic growth for 2025 and 2026 may fall below the Bank of Canada’s forecast due to the U.S. appetite for tariffs, and related uncertainty.
• Canadian goods and services exports (3.3%) and imports (2.8%) increased in Q4 2024. Metals and non-metallic mineral products led growth on the export side, while metal ores and non-metallic minerals contributed the most to increased imports.
• Canadian goods exports to countries outside the U.S. grew more strongly in Q4 (7.4%) than those destined for the U.S. (3.7%). The non-U.S. export expansion was led by exports to the European Union (11.4%) and the United Kingdom (14.1%). However, imports from the U.S. grew at a faster rate (3.8%) than imports from countries outside the U.S. (1.8%) in Q4.

Table 1: Highlights - Fourth quarter 2024

Stronger global GDP growth in Q4 driven by China

Global GDP grew by 3.4% (annualized) in the fourth quarter of 2024, marking the strongest quarterly growth of the year. Emerging economies led this increase, with a growth rate of 5.6%, driven primarily by China (7.5%). In contrast, advanced economies saw their second lowest quarterly growth of 2024 at a modest 1.8%.

China's Q4 growth rate was the fastest expansion following the post-pandemic reopening. The economy's improvement was primarily fueled by the earlier Lunar New Year and tariff concerns, both of which brought forward orders. Favourable weather conditions also supported growth.

Japan also grew more rapidly in Q4 (2.2%) compared to the Q3 (1.4%) supported by a positive contribution from net trade. In the United States, Q4 growth (2.4%) was more subdued than the last two quarters, tempered by lower investment and exports.

The economic performance of the Eurozone remained stagnant in the fourth quarter, with declines in France (-0.4%) due to a return to normal economic conditions after the Paris Olympic and Paralympic Games and in Germany (-0.8%) due to lower exports. Similarly, the United Kingdom experienced modest growth of 0.4%, marking a second consecutive quarter of relatively flat performance following a 0.1% contraction in Q3, while Italy saw small growth of 0.5% after almost no change in Q3.

Figure 1: Real GDP growth, top economies (quarterly % change, annualized)

Global trade in Q4 2024 continued to rise despite the threat of trade barriers

World merchandise trade volumes grew by 0.7% in Q4 2024, marking the sixth consecutive quarterly increase. This steady growth was welcome amid global uncertainty. Many countries had changes in governments in 2024, with some bringing new approaches to industrial policy and international trade. While domestic subsidies remain the most prevalent industrial policy instrument, import policies such as tariffs have gained traction in the public discourse, threatening the continued expansion in world trade (New Industrial Policy Observatory, 2025).

Emerging countries’ merchandise export volumes rose 2.6%, with China seeing a 5.1% increase. China’s export growth was partially fueled by front-loaded shipments (i.e. products potentially being stockpiled), especially to the U.S., in the automobile and electric machinery sectors.

On the other hand, advanced economies experienced a decline in export volumes (-0.2%), with the U.S. (-2.7%) contributing substantially to the downturn. This decline was driven by weaker global demand and a stronger U.S. dollar. Additionally, the United Kingdom experienced a 6.9% decline in export volumes.

Import volumes by advanced economies increased by 0.2% and emerging markets were up by 1.3%. The United Kingdom and countries in Latin America led their respective country groupings. U.S. imports saw significant monthly increases in November (4.2%) and December 2024 (3.8%), primarily due to businesses front-loading shipments in anticipation of potential tariffs, according to an Oxford Economics analysis. Advanced Asia, excluding Japan, experienced a 2.4% increase in imports, while its export volumes grew by 1.9%.

Global industrial production volumes continued to outpace world merchandise trade volumes, with a 1.0% growth rate in Q4. This rate is driven by emerging countries (1.6%), particularly China (2.5%).

Figure 2: World merchandise trade and industrial production volume (Index 2021 Q1 = 100)

Slower global expansion amid policy uncertainty in 2025

Since the beginning of the year, tariffs and global policy uncertainty have become increasingly significant risks, negatively affecting global growth. Oxford Economics has downgraded its world growth expectations for 2025, now forecasting 2.6% global GDP growth. This would mark the slowest global growth since the global financial crisis (excluding 2020). The downward adjustment is primarily due to weaker GDP growth in North America.

The U.S. economy has come under additional downward pressure at the start of 2025, driven in part by factors such as the U.S. imposition of global steel and aluminum tariffs on March 12 and the U.S. announcement of global reciprocal tariffs on April 2. Oxford Economics lowered their 2025 U.S. forecast to 2.0% due to a weaker start to the year and the general uncertainty surrounding the U.S.’s tariff and government spending policies, which will impact business investment, consumption and trade.

In the euro area, growth is expected to be a modest 0.9% in 2025, due to heightened political and policy uncertainty. The forecast for 2026 is slightly higher, driven by an assumption of an increase in EU military spending.

Emerging markets are forecasted to grow by 4.0% and 3.9% respectively in 2025 and 2026, driven by China and India. China's growth is expected to slow to 4.6% in 2025 due to its weak property market and heightened trade policy uncertainty. However, the direct trade impact of higher U.S. tariffs may be less pronounced for China due to their trade diversification efforts since 2018.

Figure 3: Global forecasted GDP growth (annual % change)

Strong Canadian growth in Q4, driven by consumer and business spending

Real Canadian GDP grew 2.6% in the fourth quarter of 2024 (annualized), reinforcing the solid growth trend observed during the year. Household consumption, exports and business investment contributed to growth.

Consumer spending grew the most since the second quarter of 2022, increasing by 5.6% due to higher spending on new vehicles, financial services and telecommunication services. Government spending grew for a fourth consecutive quarter (1.4%), but at a much slower pace than the previous quarter (5.4%).

Business investment increased 10.7%, driven by a 16.7% rise in residential structures. All 3 components of residential construction (new construction, renovations, and resale transfers) increased in the fourth quarter of 2024. Meanwhile, non-residential investment grew by 8.0%, primarily driven by machinery and equipment (including industrial machinery, aircraft and other transportation equipment and parts), which increased by 17.9%.

Exports of goods and services grew faster (7.4%, annualized) than imports (5.4%), contributing positively to GDP growth. Export growth was mainly driven by unwrought gold, silver, and platinum group metals, crude oil and bitumen, and passenger cars and light trucks.

In Q4 2024, employment increased by 97,200 compared to Q3 2024, mainly in services such as wholesale and retail trade and business, building and other support services. However, unemployment rose by 53,500 during the same period. Although net employment gains were positive, the unemployment rate rose to 6.7% in Q4 due to an increased number of job seekers. The number of unemployed among those aged 25-54 grew at a faster pace than for youth, marking a shift from previous trends where youth unemployment was growing at a faster pace.

Inflation in Canada fluctuated between 1.8 % and 2.0% on a year-over-year basis in Q4, with the Bank of Canada lowering interest rates by 50 basis points in October and again in December.

Figure 4: Real Canadian GDP growth (quarterly % change, annualized)

Service industries continue to drive GDP growth

GDP growth in both services (0.5%) and goods (0.4%) sectors for Q4 was broad-based, with increases in 13 out of 19 industries. The services sector has been leading the way for 11 consecutive quarters, with retail trade (1.6%), wholesale trade (1.5%), and arts, entertainment and recreation (1.3%) leading the pace of growth in Q4.

Four industries expanded by $1.5 billion or more in Q4. Though it didn’t grow at the fastest pace, real estate and rental and leasing increased the most in value terms, increasing by $2.7 billion (or 0.9%). The industry got a boost from lower interest rates. Rounding out the top expansions were the retail and wholesale trade industries (driven by motor vehicle and parts dealers, and machinery, equipment, and supplies dealers) and the construction industry (fueled by the construction of single-family homes, apartments, and home renovations), with each increasing by $1.8 billion.

However, this growth was offset by a $942 million (-0.5%) decline in manufacturing, particularly chemical manufacturing and primary metal manufacturing, which accounted for the largest declines. Additionally, utilities saw a $448 million decrease (-1.0%). This decline was mainly driven by a drop in natural gas distribution (-5.3%) and electric power generation due to intensifying drought in some areas of the country.

Figure 5: Canada’s GDP at basic prices by industry for Q4 (Quarterly % change)

Exports of goods and services see biggest rise of 2024 in Q4

Exports and imports of goods and services experienced the strongest growth of 2024 in Q4, expanding 3.3% and 2.8% respectively.

The increase in exports in goods in Q4 (4.6%) included all product categories except metal ores and non-metallic minerals. The fastest export increase was in metal and non-metallic mineral products (12.9%), especially unwrought gold, silver and platinum metal, mainly to the United Kingdom. This was due to increases in both prices (6.4%) and volumes (6.7%).

Despite 3 out of 4 service categories showing growth in Q4 2024, total exports of services declined by 1.0%. This decline was due to a 4.0% decrease in travel services, marking the third consecutive quarter of decline after a period of steady growth beginning in the first quarter of 2021. This coincided with a drop in expenditures by foreign students in Canada and decrease in new study permits issued. There were roughly 111,000 study permits issued in Q4 2024 compared to 163,000 in Q4 the year prior.

Imports increased in 9 out of 11 goods categories, following a small decrease in Q3. Driving the increase were metal ores and non-metallic minerals (27.4%) due to higher prices. Services imports rose by 1.7%, led by higher spending abroad by Canadian travellers.

Figure 6: Canada’s international trade by product (Q4 2024, quarterly % change)

Notable growth in goods exports to the European Union and the United Kingdom in Q4

In Q4, exports of goods to the U.S. grew by 3.7%, while imports of goods increased by 3.8%, representing the strongest quarterly growth of 2024 in both directions. Export growth was broad-based, with the strongest growth in energy products, basic and semi-finished products of non-ferrous metals and non-ferrous metal alloys, pharmaceutical products, miscellaneous goods and supplies (especially battery packs for electric vehicles) and higher gold transfers.

Exports of goods to countries other than the U.S. increased by a remarkable 7.4% in Q4, achieving the fastest growth since Q4 in 2023. This growth was led by an 11.4% increase in exports to the European Union; exports to Italy (77.4%), Spain (68.7%) and France (38.9%) led the way. Farm, fishing and intermediate food products (cereals in particular) increased substantially to those 3 countries in Q4, along with aircraft and other transportation equipment and parts to Italy and France. In addition, exports to the United Kingdom increased for the sixth quarter in Q4 (14.1%), mainly driven by an increase in export of unwrought gold due to its role as a financial hub.

Imports from countries other than the U.S. rose for the third consecutive quarter (1.8%). The increase was driven by Mexico (5.1%) and South Korea (7.9%). However, this was partly offset by a decline in goods from the EU (-3.9%), where Canada experienced a significant drop in imports from the Netherlands (-31.1%). 

Figure 7: Canada’s goods trade, by major trading partner (Q4 2024, quarterly % change)

Services exports experienced a generalized decline in Q4

Exports of services declined in every quarter in 2024. In Q4, services exports fell 1.0%, mainly due to travel services. Services exports to the U.S. saw a notable decline of $131 million (-0.5%) after 2 consecutive quarters of growth.

Services exports to countries other than the U.S. fell by 1.5%, largely pulled down by the EU, which experienced a $153 million drop (2.6%). This decline was particularly influenced by a 7.7% reduction in services exports to France. Additionally, exports of services to Mexico and the United Kingdom decreased by 11.8% and 5.0% respectively in Q4 2024, following significant increases in Q3 2024.

Tuition and living costs borne by foreign students in Canada are accounted for in the travel exports category; Indian students had the largest drop in study permits in Q4, with 38,000 fewer study permits compared to the same period in 2023. Accordingly, Canada’s drop in services exports to India accounted for more than one third of Canada’s overall decline in services exports in Q4 2024 compared to Q4 2023.

Imports of services from countries other than the U.S. grew 4.9% in Q4. The growth was primarily driven by Italy (11.6%), France (10.5%) and Spain (10.5%). The largest contributor to the overall growth in services imports was travel services. This was largely due to increased spending by Canadians abroad, particularly in non-U.S. destinations; the number of Canadian residents returning from countries other than the U.S. rose by 11.2% in Q4.

Meanwhile, services imports from the U.S. declined by 0.8%. The number of Canadian travellers returning home from the U.S. in Q4 only grew by 0.4% compared to 2.9% in Q3 2024.

Figure 8: Canada’s services trade, by major trading partner (Q4 2024, quarterly % change)

Significant uncertainty for Canadian economy in 2025

The Canadian economy was relatively strong in Q4 2024, with GDP growth exceeding expectations despite weaknesses in the labour market.

Prior to the uncertainty surrounding trade policy, the Bank of Canada’s January 2025 forecast projected growth of 1.8% in 2025, driven by higher household spending and residential investment. This was an improvement of 0.5 percentage points over the 2024 estimate, highlighting positive economic momentum. However, it did not account for the potential impact of widespread tariffs. Their next forecast will be released on April 16.

As the situation has evolved rapidly with significant uncertainties, this has led to a range of GDP growth forecasts for 2025, from 1.1% to 2.0%. For example, Oxford Economics forecasted in March that the ongoing trade dispute between the U.S. and Canada could slow Canada’s GDP growth to just 1.1% in 2025 and result in zero growth in 2026. Their forecast assumes that the U.S. imposes 25% tariffs on Canadian goods (10% on energy products) and Canada responds with $155 billion in counter-tariffs on U.S. imports.

Oxford Economics estimates that the imposition of tariffs would put upward pressure on prices, increasing inflation in Canada to 3.8% (year-over-year) by mid-2025. This is in addition to the end of the GST holiday, and a weaker Canadian dollar.

While the labour market remains soft and the economy continues to experience a modest surplus in supply, Oxford Economics estimates that the trade dispute could lead to a loss of 180,000 jobs over the next year, raising the unemployment rate further, to 7.7% by mid-2025. These job losses, combined with higher prices, could reduce consumer spending and further slow economic growth.

Figure 9: Canadian forecasted GDP growth (annual % change)

Table 2: Canadian trade by industry sector ($ millions)

Table 3: Canadian goods trade by trading partner ($ millions)

Table 4: Canadian services trade by trading partner ($ millions)

Bibliography

New Industrial Policy Observatory. (2025). March 2025 Synthesis.