The Canadian economy grew 1.1% in 2017’s second quarter after a 0.9% jump in Q1, Statistics Canada announced August 31, adding up to a cumulative increase of 2% in the first half of the year.
This is the strongest two-quarter growth since 2002, in which there was a half-year increase of 2.1%.
In Q2, growth was driven by household spending and goods exports, up 1.9% and 2.3%, respectively.
GDP grew 0.3% in June alone, with 14 of 20 industries seeing gains. A 0.5% jump in goods-producing industries drove the gain, mostly due to a 2% jump in construction. The services-producing side saw a more modest 0.2% increase.
“There seems to be no stopping Canada of late, as above-expected growth in Q2 led to the best four-quarter growth performance since 2006,” TD senior economist Brian DePratto said in a note to investors. “And while it was once again consumers in the driver’s seat, another strong quarter of income growth meant that households were able to increase their savings rate a touch while still keeping their wallets open.
“What’s more, while it appears unlikely that another quarter of 4%+ growth is in store any time soon, the solid monthly data for June suggests that Canada still had solid momentum heading into the summer months.”
DePratto said Q3 growth could come in around 2.5%, based on “very early tracking.”
CIBC Shenfeld’s Avery Shenfeld called both the Q2 and June data surprising, and said this was enough of a reason to forecast a quarter-point overnight rake hike by the Bank of Canada in September – one month earlier than previously forecast.
“The Bank can clearly argue that the economy simply doesn’t need rates as low as they have been to generate decent economic growth,” Shenfeld said.
“Still, this will be, to the extent possible, a ‘dovish hike,’ as the Bank will hint at a likely pause after September, lest markets push the Canadian dollar with too much enthusiasm and threaten downside pressure on exports and CPI.”
The Canadian dollar gained almost a full cent after the release of this data as well as U.S. unemployment rate figures. As of press time, the loonie was trading at 78.92 cents U.S.
@EmmaHampelBIV
