Canada’s economy grew 3.3% in Q2, but early signs point to a slowdown in July – National

The Canadian economy grew at an annualized rate of 3.3% in the second quarter, bringing the quarterly figure below estimates and an early look in July suggesting a slowdown.

Statistics Canada Release the latest monthly and quarterly real reports gross domestic product on Wednesday morning, showed the economy expanded for the fourth straight quarter, boosted by businesses and household spending.

According to the federal agency, real GDP grew 0.8 percent in the second quarter, with the economy flat in May before growing 0.1 percent in June.

An early reading for July points to a 0.1% drop.

Growth in the second quarter fell short of the agency’s preliminary estimate of 4.6% annual growth.

1:05
The US economy is currently not in recession: Powell

By comparison, the economy grew at an annualized rate of 3.1% in the first quarter of this year.

Wednesday’s report said businesses increased investment in inventory, which served as a key contributor to growth. Enterprises also increased investment in technical structure and machinery and equipment.

Meanwhile, household spending on semi-durable goods increased, with the increase driven by an increase in spending on clothing and footwear as more people returned to the office.

At the same time, investment in housing fell in the second quarter along with household spending on durable goods.

Wages rose two percent in the second quarter, with Ontario and Alberta contributing the most to the national increase. Statistics Canada says the Atlantic provinces’ wage growth in the quarter was almost double the national rate.

While disposable income increased for households, their savings rate fell from 9.5% in the first quarter to 6.2%, largely due to inflation. However, the savings rate is still above pre-pandemic levels, which was 2.7% at the end of 2019. While the report provides an aggregate savings rate, Statistics Canada notes that the savings rate tends to be higher among people with higher incomes.

“While these estimates suggest continued resilience in household net savings, inflationary pressures on consumption and trends in employee compensation will likely be key determinants of future results,” the agency said in its report.

The Bank of Canada has called the Canadian economy “overheated” and is fighting high inflation with a series of rate hikes.

The central bank is hoping higher borrowing rates will slow economic activity and bring inflation back to its 2% target.

With an annual inflation rate hitting 7.6% in July, the Bank of Canada is expected to announce another super-favorable rate hike on September 7.

2:04
Tipping inflation: Why Canadians are tipping more than ever