September 1, 2021

Unexpected! Canadian Economy Returns Negative In Second Quarter

 Canada’s economic growth lost momentum after recording a contraction in the second quarter, surprising markets that initially expected an encouraging increase.

According to Statistics Canada, gross domestic product (GDP) reportedly contracted by 1.1% in the second quarter of this year, falling far short of expectations of an increase of 2.5%.

However in June, the economy reported an increase of 0.7%, up from a revised 0.5% contraction in the previous month. This puts total economic activity only 1.5% below pre-pandemic levels.

According to analysts, this latest reading may not be meaningful for the BOC at next week’s policy announcement, but could influence the next policy meeting in October.

The central bank had previously forecast stronger growth of 2.0% in GDP in the second quarter.

The central bank will update its economic forecast next month, including its assessment of current policy. It has promised to maintain interest rates until progress is made, which is expected to happen in the second half of 2022 based on its latest projections.

The Canadian dollar traded little changed at the beginning of the European session, trading around 1.2585 against the US dollar.