Canada’s Q2 GDP growth lags expectations; contraction seen in July
2022.08.31 16:01
FILE PHOTO: A person shops at the North Mart grocery store in Iqaluit, Nunavut, Canada July 28, 2022. REUTERS/Carlos Osorio/File Photo
OTTAWA (Reuters) – Canada’s economy grew at an annualized rate of 3.3% in the second quarter, below expectations, while real GDP most likely edged down 0.1% in July after a 0.1% gain in June, Statistics Canada data showed on Wednesday.
The second-quarter result was below the Bank of Canada’s forecast for 4.0% annualized growth in gross domestic product and far lower than analyst forecasts of 4.4%, even as the June number matched expectations.
Quarterly growth was driven by business investment in inventories and household consumption, with Statscan noting that Canadians spent more on clothing and shoes amid a return to the office and an uptick in travel as the COVID-19 pandemic faded.
“The opening of the economy also boosted outlays for services in the second quarter,” Statscan said.
But imports grew more than exports in the quarter, moderating gains, with investment in housing also dropping sharply, dragged down by lower renovation spending and transfer costs. Canada’s real estate market, which had been red hot, has turned cold as the Bank of Canada hikes interest rates.
The Canadian central bank surprised markets and the public in July when it raised its policy rate by 100 basis points to 2.5% in a bid to crush inflation, its fourth consecutive increase. Bank of Canada Governor Tiff Macklem said the economy would likely have a “soft landing,” though the path to avoiding a recession was narrowing.
The Canadian dollar was trading at 1.3123 to the greenback, or 76.20 U.S. cents.
