There was no growth in May and a small growth in June.
Canada's GDP results for May were better than expected, but many economists think the steam is slowly leaving the economy.
The photo was taken by Carlos Osorio.
Canada's economy continues to defy talk of a recession, but most economists don't think that will last.
The growth rate in May was 0.0 per cent, but beat market expectations and Statistics Canada's earlier estimate of a month-over-month decline of 0.2 per cent. According to the national data agency, the economy grew 0.1 per cent in June and is on track for a 4.6 per cent reading in the second quarter.
There was no growth in May and a small growth in June.
As the BoC plays catch-up with runaway inflation, it won't deter it from pursuing its aggressive interest-rate hiking campaign.
Here is what the economists have to say about Friday's growth numbers and where they think they will go.
The May and June numbers reinforced our view that growth is going to slow very quickly going into the second half of the year. The Bank of Canada has been hiking interest rates. The weakness can be attributed to interest-rate sensitive sectors like housing, but it can also be generalized. We don't think there will be a recession in Q3 but we think there will be a recession next year.
The overall Q2 output growth is in line with our forecast. Evidence shows that the Canadian economy is operating at a higher than normal rate. The unemployment rate is very low There are early signs of strength beginning to ease in the labour market. There were fewer open jobs listed in June and July. As inflation remains too high and the Bank of Canada continues to move along an aggressive hiking path, we are seeing growth in consumer spending slow down. More interest rate hikes are on the way to help control inflation. GDP is expected to decline in mid-2023 before the end of the year.
Canada's economy performed well over the first half of the year but may be cooling off in the third quarter. The GDP math shows a loss of the running head start into Q3 compared to the early advantage. It could be that the shine is about to come off Canadian GDP growth into the third quarter.
The GDP by industry was flat in May, better than the consensus expectation of a decline. The report's details were unsurprising, with the goods-produced industry output declining and services stronger. The impact of higher rates and two quarters of negative growth in the U.S. will make us more aware of upcoming downside risks for Canadian growth. The BoC is expected to hike in September due to high inflation.
With no growth in May and a small print for June, the second quarter GDP growth is now estimated to be around 4%. In comparison to the declines seen in the US, this is slightly better. In a sign that demand growth is responding to inflation and rising interest rates, July and August showed little growth. The Bank of Canada will continue with rate hikes despite slowing growth. Growth was supposed to be slowed by interest rate hikes. We expect the BoC to keep raising rates until they get to 3.25 per cent as inflation remains well above target.
The Canadian economy slowed down at the end of the second quarter due to supply issues in the manufacturing and construction sectors. Before interest rates began to rise, the real estate sector was running at levels of activity that were well above pre-pandemic norm. The Bank of Canada is expected to raise its rate at its next meeting. The impact on disposable incomes of high inflation and rising interest rates will start to show up more widely in economic data for the second half of the year, which will allow the Bank of Canada to pause with rates just above three percent.
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