Canadian economy shrinks 1.6% in the second quarter as American tariffs squeeze exports
Statistics Canada said on Friday that Canada’s economy decreased to a large extent in the second quarter as the US tariff squeezed the export, but the high domestic and the government had some impact.
The GDP slowed down to 1.6 percent on an annual basis for the quarter ending June 30, while the growth in the first quarter was reduced by two percent, the data agency said.
The latest figures show that Canada’s economy increased at an annual rate of 0.4 percent in the first six months of the year. The contraction of the second quarter was the first quarter recession in the seven quarters.
A large-to-adoption recession in the growth may promote the possibility of cutting interest rate by Bank of Canada in September. The central bank has kept the rates stable at the rate of 2.75 percent in its last three meetings.
Bank of Canada, in its July report on monetary policy, predicted that the Canadian economy would contract somewhere in Ballpark of 1.5 percent during the second quarter.
Money Markets predicted the possibility of 48 percent of the rate cut on 17 September. Once the GDP figures were above 40 percent before it was released.
Statistics Canada said that the economy signed a contract of 0.1 percent on a monthly basis in June, mainly due to the decline in production from goods-producing industries, which is responsible for a quarter of the country’s GDP.
Economists voted by Reuters were expecting the second quarter GDP, increasing the expansion of 0.6 percent and June monthly GDP by 0.1 percent.
Andrew Grantham, a senior economist at CIBC Capital Markets, wrote, “Compared to the expected trend in monthly figures, it supports today’s release for our forecast of a weak September interest rate cut, although the upcoming employment and (inflation) data will still be important for that call.”
Exports mainly responsible for the economy sinking in Q2
According to Statistics Canada, exports responsible for sinking the economy to sink the economy in the second quarter fell to 7.5 percent – the biggest decline in five years.
Professional investment in machinery and equipment also shrunk for the first time after an epidemic, the investment in the second quarter fell 0.6 percent.
Domestic demand increased by 3.5 percent of domestic demand, indicating health in the domestic economy.
The boost came from domestic expenses, which increased by 4.5 percent on an annual basis, residential investment – which increased by 6.3 percent – and government expenditure on goods and services, which increased by 5.1 percent, said.
“It is no surprise that the Canadian economy fought in Q2 as the tariff has increased. However, domestic strength is somewhat comfortable, although the stability of that speed is an open question,” Macrostragist and managing director of Canadian rates in Montreal’s bank is written by Benjamin Ritz.
He said that the economy was developing “largely in line” with the forecast of Bank of Canada since July.
Central Bank officials opted to hold the rates in their previous meeting, and the retts predicted that the GDP report would not have the possibility of them close to cutting in September, especially with more employment and inflation data.
