A longer road to recovery: Canada’s economy shrinks, catching economists by surprise

DM

Canada’s economic recovery lost momentum in the second quarter after posting consistent growth since the depths of the pandemic and delivered a shock to forecasters. The economy contracted 0.3% between April and June, or 1.1% on an annual basis, Statistics Canada reported on Aug. 31. Adding to the dismal report, the federal agency delivered preliminary data for July that showed gross domestic product declined 0.4%, a worrisome start to the third quarter. A decline in housing activity and exports overshadowed gains in business investment, which caused a drag on the economic recovery. It’s the first quarterly drop in GDP since the second quarter of 2020, which saw the economy contract 11.3%, or 38% annualized. The data completely missed economists’ estimates, which had anticipated growth of 2.5% for the period and quieted initial optimism about broader business re-openings as much of the country exited the third wave of the COVID-19 pandemic. “The Canadian economy was not quite as resilient as pretty much everybody thought and there’s more ground to make up at this point,” said Benjamin Reitzes, economist and Canadian rates and macro strategist at Bank of Montreal.

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