OTTAWA, CANADA – It has been expression of shock as Canada’s economy witnessed a sharp contraction in the second quarter at an annualized rate of 0.2% with growth most likely flat in July 2023, this is according to data showed on Friday, a result that will probably allow the central bank to maintain rates steady amid growing fears of a possible recession.
Canada’s economy experienced an unexpected sharp contraction in the second quarter, with an annualized rate of -0.2%, and the data suggests that growth was most likely flat in July.
This outcome is expected to influence the central bank’s decision on interest rates and may help keep rates steady amid concerns of a possible recession.
The second-quarter figures were significantly lower than the Bank of Canada’s forecast of 1.5% annualized GDP growth and the 1.2% gain expected by analysts.
Canada’s economy contracts 0.2%, raising concerns of a recession
June’s gross domestic product (GDP) decreased by 0.2% compared to May, aligning with predictions.
Stephen Brown, deputy chief North American economist for Capital Economics, stated, “The Canadian economy may already have fallen into a modest recession,” and these figures “leave little doubt that the Bank of Canada will keep interest rates unchanged next week.”
The slowdown in the second quarter can be attributed to declines in housing investment, reduced inventory accumulation, and slower international exports and household spending. June was also impacted negatively by Canadian wildfires, affecting multiple industries.
The GDP report is the last significant piece of domestic data before the Bank of Canada‘s upcoming policy decision.
Most economists expect no change to the central bank’s overnight rate at the meeting, and money markets have reduced bets on an interest rate increase.
