Canada's economy contracted during 2nd quarter, StatsCan says
CBC
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.
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.
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.
