Weekly Economic Watch - September 3, 2013
The National Bank of Canada | Sep 04, 2013 07:00AM ET
– GDP grew 1.7% annualized in the second quarter of 2013. The prior quarter was downgraded to just +2.2% (previously reported as +2.5%). In Q2, the economy was restrained by trade as expected with better exports being offset by higher imports. But domestic demand bounced back after a weak Q1, thanks to consumption, government and residential construction, which more than offset the drag from business investment. Inventories were a drag on growth.
Here are the contributions by GDP component:
The monthly GDP data showed a 0.5% (unannualized) decline in June output. That’s the worst monthly decline since March 2009, when Canada was still in recession. Output in service-producing industries contracted 0.3%, the worst monthly performance since 2008. The goods sector was also hammered with a 1.1% drop in output driven by an expected drop in manufacturing, but also in construction and mining which more than offset output gains in oil and gas and agriculture.
We expect consumption to soften in the second half of the year as rising long term interest rates work their way through an already soft economy and prompt households to finally start addressing their growing debt.
The poor hand off from June means that the Bank of Canada’s forecast of 3.8% for Q3 already looks like a stretch — it will take growth rates of 0.6% or so in each month of the third quarter to approach that target. Even considering a rebound in economic activity after the Alberta floods and the Quebec construction strike, such a string of monthly expansions is highly unlikely based on our downbeat outlook for both trade and domestic demand.
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