Canada: GDP growth gains steam in the second quarter
GDP growth improved somewhat to 3.3% in seasonally adjusted annualized rate (SAAR) terms during the second quarter, from 3.1% in the first quarter.
This was driven by household spending, which increased 9.7% in the second quarter, above the first quarter’s 2.6% expansion. Public spending, meanwhile, was flat (Q1: +2.5% SAAR), and fixed investment contracted 9.0% in Q2, contrasting with the 6.6% increase recorded in the previous quarter.
Exports of goods and services bounced back, growing 10.9% in Q2 (Q1: -9.0% SAAR). In addition, imports of goods and services rebounded, growing 30.5% in Q2 (Q1: -1.4% SAAR), marking the highest reading since Q3 2020.
On an annual basis, economic growth gained momentum, accelerating to 4.6% in Q2 from the previous quarter’s 2.9% expansion. Q2’s reading marked the best result since Q2 2021.
Looking at Q3, a flash estimate from Statistics Canada put month-on-month growth in July at minus 0.1%, with contractions in the output of manufacturing; wholesale; retail trade; and utilities more than offsetting expansions in the mining; quarrying; oil and gas; and agriculture, forestry and fishing sectors.
TD Economics’ James Orlando commented on the GDP outlook:
“Canada’s economic outperformance continues […] this is the fourth straight quarter of above-trend economic growth. Though the inventory build was the biggest contributor to growth, the contribution coming from Canadian consumers points to still strong underlying fundamentals. Looking forward, the July flash estimate of -0.1% month on month is reflective of a deceleration that was always expected now that the economy has reached beyond full capacity. Not to mention, the impact of high inflation and the BoC’s surprise 1% rate hike in July are starting to have an impact.”