Canada: GDP growth records best result since Q1 2023 in the second quarter
GDP growth improved somewhat to 2.1% in seasonally adjusted annualized rate terms (SAAR) in the second quarter, up from 1.8% in the first quarter and marking the fastest increase since Q1 2023. That said, large rises in government spending and aircraft purchases flattered the data, and underlying economic momentum was less stellar. On an annual basis, economic growth edged up to 0.9% in Q2, following the previous quarter’s 0.6% growth.
Private consumption growth waned to 0.6% SAAR in Q2 compared to a 3.6% expansion in Q1. Public consumption picked up to a 6.0% increase in Q2 (Q1: +3.3% SAAR) due chiefly to a higher wage bill. Fixed investment growth accelerated to 3.5% in Q2, following the 1.3% increase logged in the previous quarter, amid higher business investment in machinery and equipment—particularly aircraft and ships. On the external front, exports of goods and services dropped 1.8% in Q2 (Q1: +2.0% SAAR) due to lower sales of precious metals and vehicles. In addition, imports of goods and services contracted 0.5% in Q2 (Q1: +0.1% SAAR). As a result, net trade subtracted from GDP.
Flash data suggests that economic activity was flat in July from June, as falls in the construction, mining and energy, and wholesale trade sectors offset growth in the finance and retail sectors. Among our panelists, the Consensus is for a slowdown in sequential GDP growth in Q3.
On the Q2 data, Desjardins’ Randall Bartlett said:
“Take a look under the hood, and Canada’s growth engine looks to be sputtering. Interest-rate sensitive sectors like durable goods consumption and residential investment both contracted in Q2. Meanwhile, government consumption and investment contributed 1.7 percentage points to growth in the second quarter, meaning private activity was in the doldrums—never a good sign. In better news, corporate profits clawed back some of the losses in the first quarter thanks in large part to the oil and gas extraction sector.”