The Canadian economy grew at an annual rate of 3.3% in the second quarter, which turned out to be slower than what experts expected, while Statistics Canada’s preliminary estimate for the month of July announces a contraction.
In releasing its gross domestic product (GDP) report for June and the second quarter on Wednesday, the federal agency showed the economy grew for a fourth consecutive quarter, supported by increased business spending. and households.
According to Statistics Canada, real GDP rose 0.8% in the second quarter, with the economy remaining stable in May before growing 0.1% in June.
A first reading for July indicates a contraction of 0.1%.
The annualized growth in the second quarter is lower than the 4.6% that Statistics Canada had mentioned in its preliminary estimate.
By comparison, the economy grew at an annual rate of 3.1% in the first quarter of this year.
Wednesday’s report said companies increased their investment in inventory, which was the main contributor to growth. Businesses also increased their investment in engineering structures, machinery and equipment.
Meanwhile, household spending on semi-durable goods rose, fueled by increased spending on clothing and footwear as more people returned to the office.
At the same time, investment in housing fell in the second quarter, as did household spending on durable goods.
Wages rose 2% in the second quarter, with Ontario and Alberta contributing the most to the national increase. Statistics Canada said Atlantic province wage growth for the quarter was nearly 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. While the report provides the overall savings rate, Statistics Canada noted that 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.
The Bank of Canada said the Canadian economy was “overheating” and fought high inflation with a series of interest rate hikes.
The central bank hopes that higher borrowing rates will slow economic activity and bring inflation back to its 2% target.
Annual inflation hit 7.6% in July, and most observers expect the Bank of Canada to announce another major interest rate hike on September 7th.