The Canadian economy is stagnating
The Canadian Press – September 1, 2023 / 5:56 am | History: 444525
Photo: The Canadian Press
Canada’s economy appeared to falter in the second quarter as residential investment continued to fall, mainly due to the slowdown in new construction.
Statistics Canada said on Friday that the economy shrank at an annual rate of 0.2 percent in the second quarter.
The agency also revised its forecast for first-quarter growth to an annualized pace of 2.6 percent from 3.1 percent.
The decline in the second quarter was driven by home investment falling 2.1 percent, posting the fifth straight quarterly decline.
New construction fell 8.2 percent in the quarter, while renovation spending fell 4.3 percent.
The drop in spending came as Canadians face higher borrowing costs fueled by rate hikes from the Bank of Canada, which is trying to bring inflation back to its 2 percent target.
The weakness in the second quarter was also due to lower inventories and slower growth in exports and household spending.
Exports of goods and services rose 0.1 percent in the second quarter, compared with a 2.5 percent increase in the first quarter.
Real household spending growth slowed to 0.1 percent in the second quarter, compared with 1.2 percent in the first quarter.
Meanwhile, business investment in non-residential construction rose 2.4 percent in the second quarter, driven by a 3.3 percent increase in civil engineering spending.
The overall decline in the second quarter came as the economy contracted 0.2 percent in June.
Services manufacturing industries declined 0.2 percent in June, while manufacturing industries shrank 0.4 percent for the month.
Statistics Canada also said its early estimate for July suggested real GDP was broadly flat for the month, but cautioned that the figure would be updated.
The report comes ahead of the Bank of Canada’s rate decision scheduled for next week.
The central bank raised its key interest rate target by a quarter of a percentage point to 5% in July, as it said it remained concerned that progress towards its 2% inflation target could falter.
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