Canada’s booming population growth is the only thing separating the country from a recession. There’s been a lot of talk about Canada’s massive growth in gross domestic product (GDP). There’s also been a lot of talk about Canada’s population boom, driven largely by immigration. However, few people seem to be discussing what the combination of the two means. When looking at GDP per capita (i.e. in the context of population), growth is falling at a rapid pace. In fact, lower growth has only typically been observed around recessions.

GDP Per Capita

The term is simple enough to figure out, but the reason it’s more important than a straight GDP read is less obvious. Gross domestic product (GDP) is a measure of a country’s aggregate economic output. That is, a measure of the total value of goods and services created/provided in a country. GDP per capita is the value of those goods and services, divided by the number of people. By just dividing GDP by the population, you get a much better view of the numbers.

A country may have large economic growth, but it doesn’t mean a whole lot if the population is growing faster. By itself, GDP is the world leader equivalent of a d*ck measuring contest. The primary benefit is being able to compare your economy to another. If GDP per capita is falling though, it means your population may be suffering from an eroded standard of living. Now what do you care more about? That your economy is bigger than a country you’ve never been to? Or whether you and your neighbour are seeing the benefits of economic growth?

Canada’s Population Boom Is Almost All Immigration

Let’s touch on Canada’s population boom quickly to give some context. The population grew 1.4% in July, when compared to a year before. This is the fastest growth of any G7 country, and more than 2x the United Kingdom. Over 82% of the growth we’re seeing today is driven by immigrants and non-permanent residents. Canada last saw growth this large in 1990, during the last major housing crunch.

Canada’s GDP Growth Is Also Huge… Kind of

The headline number for economic reports is GDP, and the most recent growth number was really big. The Canadian economy grew 3.7% in Q2 2019, on an annualized basis. The annualization needs a little emphasis. In Q1 2019, growth was just 0.4% on an annualized basis. That’s a big swing for a quarter, and is partially due to inventory rising and falling 28%, but that’s a different conversation. The point is, there’s a huge amount of seasonal impact, even with adjusted numbers. A read on a good economy, or a bad one, based on a single GDP growth point is next to useless for practical reasons. Great boasting point though.

Real GDP Per Capita Is Falling Close To Zero

If compared to the population growth, that impressive GDP really isn’t impressive. In fact, a notable Canadian economist called the GDP a “growth mirage.” Real GDP per capita was $55,480 in Q2 2019, up just 0.2% from the year before. Not exactly the massive growth typical of a booming economy.

Canadian GDP Per Capita

Gross domestic product (GDP) per capta, based on national Q2 population estimates.

Source: Statistics Canada, Better Dwelling.

Canada hasn’t seen growth like this very often, and it almost always is during a not so fun time. This is the lowest growth since 2016, during the “oil patch” recession that started a year before. Prior to that, numbers lower than this were seen in 2008, and 2009 – during the Great Recession. Prior to that, we need to go all the way back to 1990 to 1992, at the end of the last population/housing boom.

Canadian GDP Per Capita Change

The percent change in Gross domestic product (GDP) per capta, based on national Q2 population estimates.

Source: Statistics Canada, Better Dwelling.

Love it or hate it, Canada is using immigration as economic stimulus. On one hand, the rise in immigration improves spending and home values. On the other hand, households are only seeing a minor improvement in the standard of living. The minor improvement is really not reflective of the healthy economy narrative being told. Even more concerning is a substantial amount of this minor improvement, is based on debt.

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