The Toronto skyline in Canada

Canada GDP Q2 2020

Canada: GDP records largest contraction on record in Q2

GDP declined at a quicker rate of 38.7% in seasonally-adjusted annualized terms (SAAR) in the second quarter, well below the 8.2% contraction logged in the first quarter and marking the worst reading on record. On an annual basis, GDP fell 13.0% in Q2, down from the previous quarter’s 0.9% decrease.

The downturn was broad-based and the result of strict lockdown measures in place for the majority of Q2, with private consumption, public spending and fixed investment all contracting. Private consumption dropped at a sharper rate of 43.0% SAAR in Q2 compared to the 12.4% contraction in Q1. Meanwhile, fixed investment dropped at a steeper pace of 45.6% in Q2, down from the 1.1% contraction recorded in the previous quarter.

On the external front, exports of goods and services fell 55.6% on a SAAR basis in the second quarter, which was below the first quarter’s 8.6% contraction. In addition, imports of goods and services contracted at a sharper rate of 64.1% SAAR in Q2 (Q1: -9.9% SAAR). Consequently, the external sector contributed positively to the overall economy in Q2, adding 2.4 percentage points, which was up from the 0.4 percentage-point contribution in the first quarter.

Looking ahead, the economy should rebound in the second half. Indeed, the flash GDP estimate for July points to a 3.0% expansion on a month-on-month seasonally-adjusted basis. However, the hit to the labor market will weigh somewhat on domestic demand.

Commenting on the outlook, Benoit P. Durocher, senior economist at Desjardins, noted:

“The recovery of the Canadian economy is clipping along. That said, it still has quite a way to go before returning to a pre-pandemic level. There is still much uncertainty, and the recovery has been uneven across sectors. Furthermore, the possibility of a second wave of the pandemic later in the year cannot be completely ruled out.”

Free sample report

Access essential information in the shortest time possible. FocusEconomics provide hundreds of consensus forecast reports from the most reputable economic research authorities in the world.
Close Left Media Arrows Left Media Circles Right Media Arrows Right Media Circles Arrow Quote Wave Address Email Telephone Man in front of screen with line chart Document with bar chart and magnifying glass Application window with bar chart Target with arrow Line Chart Stopwatch Globe with arrows Document with bar chart in front of screen Bar chart with magnifying glass and dollar sign Lightbulb Document with bookmark Laptop with download icon Calendar Icon Nav Menu Arrow Arrow Right Long Icon Arrow Right Icon Chevron Right Icon Chevron Left Icon Briefcase Icon Linkedin In Icon Full Linkedin Icon Filter Facebook Linkedin Twitter Pinterest