The Canadian economy surprised analysts with better-than-expected growth in 2024’s second quarter, although underlying signs of softening mean the Bank of Canada is still likely to lower interest rates when it meets next week.
Statistics Canada said on Friday that overall gross domestic product (GDP) rose by 2.1% year over year in Q2, higher than the Bank of Canada had predicted and above expectations of analysts surveyed by Bloomberg.
That reading marked an uptick from 1.8% between January and March – but growth was likely minimal heading into the third quarter, with a flat performance registered for both June and July.
Still, the economy’s strength in the first half of the year means it’s unlikely to dive into a recession even despite its recent slowdown. An 11% increase in government spending accounted for much of the second-quarter growth, while total investment excluding inventories was up by 3.5%.
Per capita GDP dropped for the fifth quarter in a row while growth in household spending also slowed, easing to a 0.6% annualized pace.
Having already trimmed its policy rate by a total of 50 basis points through June and July cuts, the Bank of Canada is poised to introduce a further reduction at its meeting next Wednesday (September 4).
A slowing economy, rising unemployment, and falling inflation gave the central bank the green light to begin cutting over the summer, with little indication that a flare-up in economic growth or the consumer price index (CPI) is imminent.
The US economy, which showed stubborn growth throughout the opening half of the year, is also finally beginning to slow – and inflation data released today showed that underlying inflation south of the border is no longer surging.
CMP
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