Canada’s gross domestic product (GDP) fell 0.2% in the second quarter, a trend that forecasters had not predicted but that could help curb inflation in the coming months.
The real GDP numbers were “surprising,” according to Randall Bartlett, senior director of Canadian economics at Desjardins, with forecasters expecting growth between 1% and 1.5%.
Residential construction investment contributed significantly to this decline, although construction starts and property resale activity increased significantly over the same period.
The savings rate of private households also increased, so that disposable income was higher than the increase in consumption.
All these factors suggest that the slowdown in growth is likely to continue and lead to a slight decline in real GDP growth in the third quarter, believes Mr Bartlett.
No interest rate hike
“This situation, together with a decline in the labor market, is likely to help further contain inflation in the coming months,” emphasized the economist.
Therefore, after raising the key interest rate to 5% last July, it should not move in the Bank of Canada’s expected announcement next week.
“Today’s data reinforces our view that the Bank of Canada is done raising rates this cycle and its next step should be a cut, possibly as early as quarter 2024,” Bartlett said.