GDP rebound in the 1st quarter | Quebec’s economy shows “signs of recovery”

The rebound in growth in the Quebec economy in the first quarter heralds the first “signs of recovery” after ten consecutive months of contraction, according to banking sector economists.

According to the Institute of Statistics of Quebec, the real GDP of the Quebec economy increased by 3.6% on an annualized basis during the first three months of 2024, after the decline of 0.4% recorded in the last quarter of 2023.

Moreover, this surge in Quebec’s GDP in the first quarter of 2024 is almost twice as high as the 1.7% rebound measured for the entire Canadian economy.

“After going through a period of major difficulties in 2023, with a contraction in real GDP for three consecutive quarters, the Quebec economy is finally returning to growth. The phase of economic contraction that occurred from spring 2023 until the end of last year therefore seems to be over,” note economists Hélène Bégin and Maëlle Boulais-Préseault, at Mouvement Desjardins.

Beyond the rebound in real GDP in the first quarter, the Quebec economy is sending out several positive signals.

Consumer spending has rebounded strongly and the savings rate remains high thanks to the rapid growth in disposable personal income, Desjardins economists report.

“Despite the context of high inflation in recent years, the renegotiation of collective agreements and the desire of several companies to retain their employees are among the factors that fuel the growth of wages and, by extension, that of income. Also, the revival of the residential sector is excellent news, as is that of investments in machinery and equipment,” they add.

At the National Bank, economist Daren King reports that “real GDP per capita (in Quebec) experienced a first increase after seven quarters (21 months) of contraction.”

Consequently, he predicts for the coming months, “I continue to believe that Quebec’s GDP could prove resilient compared to the rest of Canada, in particular due to the lower level of debt of Quebec households, but also thanks to to their high savings rate which continues to increase.

Waiting for interest rates to fall

At Desjardins, M^mes Bégin and Boulais-Préseault remain reserved pending the next interest rate drops.

“Despite the improvement in the economic context in Quebec, many businesses and several households are facing a difficult, even critical, financial situation,” they note in an analysis consulted by The Press.

“The decline in key interest rates that will continue in Canada this year and next year will help reduce borrowers’ vulnerability while solidifying the economic recovery already underway in Quebec.”