Article content
Canada’s economic recovery lost momentum in the second quarter after posting consistent growth since the depths of the pandemic and delivered a shock to forecasters.
First contraction since the depths of the pandemic last year
Canada’s economic recovery lost momentum in the second quarter after posting consistent growth since the depths of the pandemic and delivered a shock to forecasters.
The economy contracted 0.3 per cent between April and June, or 1.1 per cent on an annual basis, Statistics Canada reported on Aug. 31. Adding to the dismal report, the federal agency delivered preliminary data for July that showed gross domestic product declined 0.4 per cent, a worrisome start to the third quarter.
A decline in housing activity and exports overshadowed gains in business investment, which caused a drag on the economic recovery. It’s the first quarterly drop in GDP since the second quarter of 2020, which saw the economy contract 11.3 per cent, or 38 per cent annualized.
The data completely missed economists’ estimates, which had anticipated growth of 2.5 per cent for the period and quieted initial optimism about broader business re-openings as much of the country exited the third wave of the COVID-19 pandemic.
“The Canadian economy was not quite as resilient as pretty much everybody thought and there’s more ground to make up at this point,” said Benjamin Reitzes, economist and Canadian rates and macro strategist at Bank of Montreal. “It’s a longer road to recovery.”
The surprising figures also contrasted with the Bank of Canada’s estimates of two-per-cent growth for the quarter, which means they will likely revise down their forecast on economic growth. The data suggests the recovery could be prolonged for an extended period of time than previously thought and reinforces the trickiness that policy-makers have to contend with in steering the economy.
For one, housing has been a sector that experienced a flurry of activity over the pandemic, driven in part by historically low interest rates and extraordinary government stimulus. But, in recent months the real estate market has seen a cooling, which is reflected in the GDP data. Homeownership transfer costs, which includes all costs associated with the sale of a home, declined 17.7 per cent in the quarter.
Exports also experienced negative growth in the quarter, dropping four per cent. Reitzes attributed the declines to woes in the manufacturing and auto sectors that are currently battling global chip shortages and supply-chain disruptions.
At the same time, business investment grew 5.7 per cent in the second quarter but was not enough to recover the losses in housing and exports.
Early July data, the first month that sets up the third quarter, experienced unexpected declines largely attributable to drops in retail, construction and manufacturing activity and further details will be provided in the next monthly GDP report in October.
The numbers could figure into the central bank’s interest rate announcement next week though they likely won’t move the needle, said Sri Thanabalasingam, a senior economist at Toronto-Dominion Bank. Rather, policy-makers will likely take on a more cautious tone in response to the data and hold both the interest rate and bond purchases. The central bank in July pared back its bond purchases to $2 billion per week.
Because the data knocks some confidence into how well Canada’s economy manages through viral COVID-19 waves, that throws into question how badly the Delta variant will impact businesses and Canadians looking ahead.. “It’s a downside risk to the economic forecast,” Thanabalasingam said. “It could further delay the economy from getting back to full capacity.”
• Email: bbharti@postmedia.com | Twitter:
_____________________________________________________________
For more stories like this, sign up for the FP Economy newsletter.
_____________________________________________________________
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets also climbed higher.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
This report by The Canadian Press was first published Sept. 13, 2024.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD)
The Canadian Press. All rights reserved.
OTTAWA – Statistics Canada says wholesale sales, excluding petroleum, petroleum products, and other hydrocarbons and excluding oilseed and grain, rose 0.4 per cent to $82.7 billion in July.
The increase came as sales in the miscellaneous subsector gained three per cent to reach $10.5 billion in July, helped by strength in the agriculture supplies industry group, which rose 9.2 per cent.
The food, beverage and tobacco subsector added 1.7 per cent to total $15 billion in July.
The personal and household goods subsector fell 2.5 per cent to $12.1 billion.
In volume terms, overall wholesale sales rose 0.5 per cent in July.
Statistics Canada started including oilseed and grain as well as the petroleum and petroleum products subsector as part of wholesale trade last year, but is excluding the data from monthly analysis until there is enough historical data.
This report by The Canadian Press was first published Sept. 13, 2024.
The Canadian Press. All rights reserved.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in the base metal and energy sectors, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 172.18 points at 23,383.35.
In New York, the Dow Jones industrial average was down 34.99 points at 40,826.72. The S&P 500 index was up 10.56 points at 5,564.69, while the Nasdaq composite was up 74.84 points at 17,470.37.
The Canadian dollar traded for 73.55 cents US compared with 73.59 cents US on Wednesday.
The October crude oil contract was up $2.00 at US$69.31 per barrel and the October natural gas contract was up five cents at US$2.32 per mmBTU.
The December gold contract was up US$40.00 at US$2,582.40 an ounce and the December copper contract was up six cents at US$4.20 a pound.
This report by The Canadian Press was first published Sept. 12, 2024.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD)
The Canadian Press. All rights reserved.
Looking for the next mystery bestseller? This crime bookstore can solve the case
TIFF audience prizes for ‘Life of Chuck,’ Hip doc; Rankin among Canadian winners
Nova Scotia premier repeats calls for Ottawa to pay for protecting Chignecto Isthmus
Emir of Qatar to visit Ottawa on what will be his first official trip to Canada
Labour Minister praises Air Canada, pilots union for avoiding disruptive strike
Halifax library workers accept deal to end strike, branches to re-open Thursday
Air Canada deal avoids shutdown, brings relief to passengers and business groups
Slovenia’s Tadej Pogacar wins Grand Prix Cycliste de Montreal