According to data released this morning by Statistics Canada, the Canadian economy declined at a 1.6% annual pace in the second quarter, the largest quarterly decline since the global financial crisis in Q2 2009. In comparison, the U.S. economy grew at a 1.1% annual rate last quarter, more sluggish than expected earlier this year. The weakness in Canada cannot be fully attributed to the decline in oil and gas production and the wildfire in Fort McMurray. Even without this effect, real (inflation-adjusted) GDP grew by a mere 0.4% compared to a 2.5% annual pace in the first quarter. The other major depressant for the Canadian economy was the largest decline in exports since the first quarter of 2009 as well as continued weakness in business fixed investment.
The June data also confirmed the recent slowdown in housing. Construction declined for the third month in a row in June. Real estate agents and brokers posted a second consecutive monthly decline, as home resales activity was down. This is in line with the Canadian Real Estate Association reports, providing more recent data showing resales slowed further in July.
The dismal Q2 decline in economic activity was worse than the 1.0% downturn predicted by the Bank of Canada in its July monetary policy report. But the Bank also expected a 3.5 % rebound this quarter. The July introduction of the federal government’s new Canada child benefit and an increase in infrastructure spending should boost the economy meaningfully in the second half of this year. The Bank of Canada is likely to remain on the sidelines assessing the effect of these policy changes.
If you are concerned about the economy and are wondering if you could save money, contact us today. At Client First Mortgage Solutions, we are always looking to save our clients’ money. We will conduct a mortgage analysis to see if there is any way to save you money by re-writing, early renewing, or blending your existing mortgage. We always look out for the client’s best interest.
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