The Canadian economy appeared to stall in the second quarter as investment in housing continued to fall, led by a drop in new construction.
Statistics Canada said Friday the economy contracted at an annualized rate of 0.2 per cent in the second quarter.
The agency also revised its reading for growth in the first quarter to an annual pace of 2.6 per cent, down from 3.1 per cent.
The decline in the second quarter came as housing investment fell 2.1 per cent to post its fifth consecutive quarterly decrease. New construction dropped 8.2 per cent in the quarter, while renovation spending also fell 4.3 per cent.
The drop in spending came as Canadians face higher borrowing costs fuelled by interest rate hikes by the Bank of Canada, which is trying to bring inflation back to its target of two per cent.
The weakness in the second quarter was also attributed to lower inventory accumulations, as well as slower growth in exports and household spending.
Exports of goods and services crept up 0.1 per cent in the second quarter compared with a 2.5 per cent increase in the first quarter.
Growth in real household spending slowed to 0.1 per cent in the second quarter compared with 1.2 per cent in the first quarter.
Good news that consumer spending has slowed: economist
Pedro Antunes, chief economist at the Conference Board of Canada, said it came as a surprise that the economy had stalled.
The Bank of Canada had expected a 1.5 per cent annualized GDP growth, while analysts had forecast a 1.2 per cent gain.
“We had been thinking the economy might be a little stronger than what it finally came in at. I think that’s actually good news,” he said, adding that it appears the central bank’s tightened monetary policy is slowing consumer spending.
“Personally I think that we should hold off on any further rate hikes,” Antunes said.
“The Bank of Canada is playing a difficult game here. It’s not just about raising rates. It’s about expectations and about kind of driving the message that [the bank] is going to be forceful on this issue.
Construction manager says fewer homes being built
The hardest hit sectors are retail and wholesale — industries that cater to households and offices. According to Antunes, the slowdown in construction is somewhat concerning, but not surprising.
“We are trying to build more homes for, yes, essentially that very strong population growth that we’re going through right now. [But] it’s not unexpected given the fact that we’ve raised interest rates so drastically.”
Colin Snaith, a senior manager with SG Constructors, said that construction projects are seeing the effects of higher interest rates.
“We’ve definitely seen a reduction in the number of homes being built, particularly in the high-rise sector,” Snaith told CBC News during an interview at a building site in Toronto.
“Our industry thankfully has remained quite busy, but that’s due to the fact that a lot of the projects ongoing right now have been started before the interest rates took effect.”
A residential and commercial construction site is shown near the Longueuil metro station in Quebec on Aug. 8. Statistics Canada says the economy contracted in the second quarter of this year. (Ivanoh Demers/CBC/Radio-Canada)
Snaith said there is a large backlog of construction projects that were scheduled to start soon — but many of their start dates have been pushed back, with the pre-construction period extended.
“I think everyone’s just being more cautious with their dollar right now,” he added.
“A lot of the time, financing is tied to condo sales and home sales are down right now. Everyone’s just waiting for interest rates to stabilize.
Early estimates suggest real GDP unchanged in July
Meanwhile, business investment in non-residential structures gained 2.4 per cent in the second quarter, boosted by a 3.3 per cent gain in spending on engineering structures.
The overall pullback in the second quarter came as the economy contracted by 0.2 per cent in June.
Services-producing industries dropped 0.2 per cent in June, while goods-producing industries contracted 0.4 per cent.
Statistics Canada also said its early estimate for July suggested real GDP was essentially unchanged for the month, though it cautioned the figure would be updated.
The report comes ahead of the Bank of Canada’s latest interest rate decision, set for next Wednesday.
The central bank raised its key interest rate target by a quarter of a percentage point to five per cent in July, saying it remained concerned that progress toward its two per cent inflation target could stall.
TORONTO – Cineplex Inc. reported a loss in its latest quarter compared with a profit a year ago as it was hit by a fine for deceptive marketing practices imposed by the Competition Tribunal.
The movie theatre company says it lost $24.7 million or 39 cents per diluted share for the quarter ended Sept. 30 compared with a profit of $29.7 million or 40 cents per diluted share a year earlier.
The results in the most recent quarter included a $39.2-million provision related to the Competition Tribunal decision, which Cineplex is appealing.
The Competition Bureau accused the company of misleading theatregoers by not immediately presenting them with the full price of a movie ticket when they purchased seats online, a view the company has rejected.
Revenue for the quarter totalled $395.6 million, down from $414.5 million in the same quarter last year, while theatre attendance totalled 13.3 million for the quarter compared with nearly 15.7 million a year earlier.
Box office revenue per patron in the quarter climbed to $13.19 compared with $12 in the same quarter last year, while concession revenue per patron amounted to $9.85, up from $8.44 a year ago.
This report by The Canadian Press was first published Nov. 6, 2024.
TORONTO – Restaurant Brands International Inc. reported net income of US$357 million for its third quarter, down from US$364 million in the same quarter last year.
The company, which keeps its books in U.S. dollars, says its profit amounted to 79 cents US per diluted share for the quarter ended Sept. 30 compared with 79 cents US per diluted share a year earlier.
Revenue for the parent company of Tim Hortons, Burger King, Popeyes and Firehouse Subs, totalled US$2.29 billion, up from US$1.84 billion in the same quarter last year.
Consolidated comparable sales were up 0.3 per cent.
On an adjusted basis, Restaurant Brands says it earned 93 cents US per diluted share in its latest quarter, up from an adjusted profit of 90 cents US per diluted share a year earlier.
The average analyst estimate had been for a profit of 95 cents US per share, according to LSEG Data & Analytics.
This report by The Canadian Press was first published Nov. 5, 2024.
ST. JOHN’S, N.L. – Fortis Inc. reported a third-quarter profit of $420 million, up from $394 million in the same quarter last year.
The electric and gas utility says the profit amounted to 85 cents per share for the quarter ended Sept. 30, up from 81 cents per share a year earlier.
Fortis says the increase was driven by rate base growth across its utilities, and strong earnings in Arizona largely reflecting new customer rates at Tucson Electric Power.
Revenue in the quarter totalled $2.77 billion, up from $2.72 billion in the same quarter last year.
On an adjusted basis, Fortis says it earned 85 cents per share in its latest quarter, up from an adjusted profit of 84 cents per share in the third quarter of 2023.
The average analyst estimate had been for a profit of 82 cents per share, according to LSEG Data & Analytics.
This report by The Canadian Press was first published Nov. 5, 2024.
