Canada’s economy had its worst quarterly stretch since the start of the pandemic, contracting at an annualized rate of 1.1 per cent between April and June and possibly dropping further in July.
The decrease in real gross domestic product in the second quarter was the first quarterly contraction recorded since the sharp drop during the same stretch one year earlier during first-wave lockdowns.
And it was a sharp turnaround from the agency’s initial estimate last month that the economy expanded at an annual rate of 2.5 per cent for the April-to-June period, which Statistics Canada chalked up to additional data that wasn’t available last month.
Statistics Canada said driving the drop in the second quarter of this year were declines in home resale activity and exports. Increased business and government spending, as well as new home construction and renovations in the quarter weren’t enough to make up the shortfall.
2:53 Pandemic blamed for Canada’s biggest GDP drop
Pandemic blamed for Canada’s biggest GDP drop – Mar 2, 2021
Household spending also stayed flat in the quarter, even as restrictions rolled back in much of the country and consumers had more places to spend.
What appears to have happened, though, is that consumer spending in the quarter appeared to fuel price increases amid widespread supply-chain issues, rather than fuel growth.
Even as new figures show a contraction in activity just ahead of the election call, Liberal Leader Justin Trudeau says the domestic economy is bouncing back “extremely strongly” from COVID-19.
Speaking in the Ottawa suburb of Kanata, Trudeau says there are pockets of the economy that remain weak, pointing to arts and culture as an example.
He also argues that Conservative plans for child care, among other proposals, would hurt the pace of the economic recovery.
The Bank of Canada has decided to let inflation run above its two-per-cent target until the economy recovers, but now faces a more complicated policy-making landscape, said BMO chief economist Douglas Porter.
He said tightening monetary policy 00 usually done to cool price pressures _ would slow growth, but adding stimulus could simply fuel inflation.
“This is where policy-making gets very complicated, and the decisions are tough,” Porter said.
“Sometimes you have the best of all worlds when you’ve got strong growth and low inflation, and sometimes you have the worst of all worlds where you have high inflation and low or no growth _ and that’s the situation that we’re temporarily in right now.”
The second quarter ended with the economy growing by 0.7 per cent in June after two months of declines, placing total economic activity 1.5 per cent below pre-pandemic levels recorded in February 2020.
The agency said its initial estimate for July shows a contraction of 0.4 per cent for the month.
4:45 What to expect in the upcoming federal election
What to expect in the upcoming federal election – Aug 15, 2021
Statistics Canada said the main decreases in July were in manufacturing, construction and retail trade, while accommodation and food services had strong monthly gains as public health restrictions eased.
Total economic activity in July was about two per cent below pre-pandemic levels recorded in February 2020.
The figures suggest the Canadian economy wasn’t on as strong a footing as many believed at the start of the third quarter of the year, said CIBC senior economist Royce Mendes.
“And with the fourth wave now seemingly here, the economy faces another storm to navigate through,” he wrote in a note.
There were some silver linings in the figures, said TD senior economist Sri Thanabalasingam, pointing to consumer reorienting their spending from goods to services, which weighed on retail trade output, and a cooling in the super-hot housing market towards more normal levels.
Those weaknesses, he said, should become less of a drag as activity in each sector normalizes.
What could pose a larger drag for the rest of the year is the spread of the Delta variant of COVID-19, said Thanabalasingam.
Provinces are looking to avoid lockdowns by proposing vaccine passports to access non-essential businesses, companies implementing regular testing, and a federal vaccine mandates for workers and travellers.
The rise in case counts could affect consumer confidence that could prove to be a material shock, Thanabalasingam said.
“That could weaken the pace of the recovery,” he said.
“I don’t think it blows the economic recovery off course, given all the measures that we have seen being implemented, but it could slow the recovery.”
Porter said he’s cutting his forecast for growth for the year to five per cent from six per cent, but added that “five per cent might even look a tad optimistic at this point, to be honest.”
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.
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.
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.
