While signs of a slowdown are appearing in the United States and elsewhere in the world, the Canadian economy is still holding up. Gross domestic product rose 0.8% in the second quarter, giving it an annual growth rate of 3.3%.
Updated yesterday at 4:38 p.m.
This is lower than the 4% growth projected by the Bank of Canada in its July forecast, but it is “far from a disaster”, commented CIBC economist Andrew Grantham.
National Bank economists agree. “The performance of the Canadian economy is quite enviable compared to the rest [des pays] of the G7″, say Matthieu Arseneau and Alexandra Ducharme in their comments to investors.
Consumers returning to the office, going out more and starting to travel again led second-quarter growth. Spending on clothing and footwear on the goods side, and air transportation, food and alcoholic beverage services, as well as accommodation, rose sharply during the months of April, May and June, reports Statistics Canada . In total, consumers increased their spending by 9.7%.
On the other hand, residential investment, which includes renovation spending, fell 27.6%, an unexpectedly large drop, after two quarters of strong growth. “The weakness of residential investment surprised forecasters,” admits Randall Bartlett, senior director, Canadian economy, at Desjardins. With rising interest rates beginning to cool the housing market, this downward trend will continue into the third quarter, he said.
The other surprise of the second quarter concerns imports, which posted a spectacular increase of 30.5% and which more than canceled out the increase in exports, which were nonetheless stimulated by the high price of crude oil. The resumption of travel as well as the purchase of very popular hybrid and electric cars, while gasoline prices are high, partly explain the jump in exports, according to Statistics Canada.
Towards an increase of 75 points?
The picture for the second quarter does nothing to deflect the Bank of Canada from its desire to raise interest rates to fight inflation, which remains very high at 7.6% (July figures).
Preliminary estimates from Statistics Canada indicate that the third quarter began with the economy shrinking 0.1% in July, and all indications are that growth will slow by the end of the year.
Many economists are still expecting an increase of 75 basis points, after the surprise increase of 100 basis points or 1% in the key rate in July. If this proves true, the key rate will rise to 3.25%, ie above the so-called neutral threshold of 3% from which the risks of recession could increase considerably.
The Bank of Canada’s next interest rate decision will be known on Wednesday, September 7th.
Decline in the savings rate
Meanwhile, Statistics Canada’s preliminary reading for July points to a contraction of 0.1%. Economists widely expect an economic slowdown to occur.
The extent to which Canadians feel the downturn will depend on their personal circumstances, Porter said – including the sector they work in, and whether they are borrowers or savers.
In addition, wages rose 2% in the second quarter, with Ontario and Alberta contributing the most to the national increase, Statistics Canada said. Atlantic Provinces wage growth for the quarter was almost double the national rate.
As household disposable income increased, their savings rate fell from 9.5% in the first quarter to 6.2%, mainly due to inflation. However, the savings rate remains well above pre-pandemic levels – it was 2.7% at the end of 2019. Although the report provides the overall savings rate, Statistics Canada noted that the rates savings tended to be higher among people in the highest income brackets.
“While these estimates suggest that the resilience of net household savings continues, inflationary pressures on consumption and trends in employee compensation are likely to be key determinants of future results,” the agency said. in his report.
With The Canadian Press