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Canada GDP Q2 2023

Canada: GDP records sharpest contraction since Q2 2021 in the second quarter

GDP fell 0.2% in seasonally adjusted annualized rate terms (SAAR) in the second quarter, below the 2.6% expansion seen in the first quarter and far worse than the over-1% expansion that was initially predicted by the statistics office and market analysts. Q2’s reading marked the worst result since Q2 2021. On an annual basis, economic growth waned notably to 1.1% in Q2, following the previous period’s 2.1% increase and marking the worst reading since Q1 2021. Worker strikes and wildfires weighed on momentum in Q2, with the latter leading to contractions in the agricultural, energy and accommodation services sectors.

Private consumption growth slowed to 0.2% SAAR in Q2 from a 4.7% expansion in Q1. Government consumption rebounded, growing 2.5% in Q2 (Q1: -3.7% SAAR). Meanwhile, fixed investment bounced back, growing 1.2% in Q2, contrasting the 2.7% decrease logged in the previous quarter.

On the external front, exports of goods and services growth fell to 0.4% in Q2 (Q1: +10.2% SAAR). Conversely, imports of goods and services growth picked up to 1.9% in Q2 (Q1: +0.7% SAAR).

Advance estimates suggest economic activity was broadly unchanged month on month in July, and our Consensus is currently for GDP to be roughly stable in Q3 from Q2.

On the outlook, TD Economics’ James Orlando said:

“While federal government transfers in July may result in a short-term boost in the third quarter, we believe Canada has entered a stage of below trend economic growth. This should continue through the rest of this year, as the impact of high interest rates work through the economy to prevent another acceleration in demand.”

Desjardins’ Randall Bartlett said:

“Statistics Canada expects a flat print in July 2023. Assuming flat real GDP growth in August and September, this would put Q3 growth in real GDP by industry at -0.4% annualized. That said, some of the weakness can be chalked up to wildfires, which could support positive prints in coming months as rebuilding begins.”

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