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The Bank of Canada building is shown in Ottawa. (Adrian Wyld\/The Canadian Press)Exports mainly responsible for sinking economy in Q2<\/p>\nCanada’s economy shrank\u00a0much more than expected\u00a0in the second quarter as U.S. tariffs squeezed exports, but higher household and government spending softened the blow somewhat, Statistics Canada said\u00a0on Friday.<\/p>\n
The GDP for the quarter that ended June 30 slowed\u00a0by 1.6 per cent\u00a0on an annualized basis, while first-quarter growth was\u00a0downwardly revised to\u00a0two per cent, the data agency\u00a0said.<\/p>\n
The\u00a0latest figures show that Canada’s economy grew at an annualized rate of 0.4 per cent in the first six months of the year.\u00a0The second quarter contraction was the first quarterly slowdown in\u00a0seven quarters.<\/p>\n
A larger-than-expected slowdown\u00a0in growth could boost chances of an interest rate cut by the Bank of Canada in September. The central bank\u00a0has kept rates steady at 2.75 per cent\u00a0at its last three meetings.<\/p>\n
The Bank of Canada predicted in its July report on monetary policy that the Canadian economy would contract somewhere in the ballpark of 1.5 per cent during the second quarter.<\/p>\n
Money markets predicted\u00a0a 48\u00a0per cent chance\u00a0of a rate cut on Sept. 17 once GDP figures were released\u00a0\u2014\u00a0up from 40 per cent before they were published.<\/p>\n
Statistics Canada said the economy contracted by 0.1 per cent\u00a0in June\u00a0on a monthly basis, mainly led by a decline in output from goods-producing industries, which accounts for a quarter of the country’s GDP.<\/p>\n
Economists polled by Reuters were expecting\u00a0second-quarter GDP to contract by 0.6 per cent\u00a0and the June monthly GDP to expand by 0.1 per cent.<\/p>\n
“The most concerning aspect of today’s report is the seemingly weak momentum that the economy still had towards the end of the quarter and into the start of Q3,”\u00a0wrote Andrew Grantham, a senior economist at CIBC Capital Markets.<\/p>\n
“That is supportive for our forecast that the Bank of Canada will cut interest rates by 25 [basis points]\u00a0at their September meeting in an effort to accelerate the recovery, although next week’s employment figures are still important to that call.”<\/p>\n
The Bank of Canada building is shown in Ottawa. (Adrian Wyld\/The Canadian Press)Exports mainly responsible for sinking economy in Q2<\/p>\n
Exports, mainly responsible for sinking the economy in the second quarter, declined 7.5 per cent\u00a0during that period\u00a0\u2014 the biggest drop in five years, according to Statistics Canada.<\/p>\n
Business investment in machinery and equipment also shrank\u00a0for the first time since the pandemic, with investments falling 0.6 per cent\u00a0in the second quarter.<\/p>\n
Domestic demand, however, grew by 3.5 per cent, indicating health in the domestic economy.<\/p>\n
The boost came from household spending,\u00a0which jumped by 4.5 per cent\u00a0on an annualized basis, residential investments \u2014 which rose 6.3 per cent \u2014 and government spending on goods and services,\u00a0which surged by 5.1 per cent, Statistics Canada\u00a0noted.<\/p>\n
WATCH | U.S. ends duty-free shipping rule\u00a0on Friday:\u00a0<\/strong> End of U.S. duty-free rule could crush some Canadian businesses<\/p>\n On Friday, the U.S. will end its de minimus exemption rule on goods shipped into the country valued under $800, leaving some Canadian businesses bracing for a big hit in sales.<\/p>\n “It should come as no surprise that the Canadian economy struggled in Q2 as tariffs ramped up. However, the domestic strength is somewhat comforting, although the sustainability of that momentum is an open question,” wrote Benjamin Reitzes, a macrostrategist and managing director of Canadian rates at the Bank of Montreal.<\/p>\n The economy is evolving “largely in line” with the Bank of Canada’s forecast from July, he added.<\/p>\n Central bank officials opted to hold rates at their last meeting, and Reitzes predicted that\u00a0the GDP report likely won’t push them any closer to cutting in September, especially with more employment and inflation data to come.<\/p>\n","protected":false},"excerpt":{"rendered":"Canada’s economy shrank\u00a0much more than expected\u00a0in the second quarter as U.S. tariffs squeezed exports, but higher household and…\n","protected":false},"author":3,"featured_media":185058,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12],"tags":[64,79,67,132,68],"class_list":{"0":"post-185057","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-business","9":"tag-economy","10":"tag-united-states","11":"tag-unitedstates","12":"tag-us"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@us\/115113087989873518","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/185057","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/comments?post=185057"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/185057\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media\/185058"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media?parent=185057"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/categories?post=185057"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/tags?post=185057"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![\"\"](\"https:\/\/www.europesays.com\/us\/wp-content\/uploads\/2025\/08\/1756486215_209_default.jpg\")
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