Canada showed slower economic growth in May
During the previous two months, Canada’s economic growth showed signs of slowing down, following a strong beginning of 2022, amid extremely high inflation and growing interest rates.
According to Statistics Canada, the output in June was up by 0.1% only, following no changes at all in May. Meanwhile, the period from February to April reported better results, pushing the second quarters numbers higher – to about 4.6% on a year-over-year basis.
It means we can see an economy that showed strong growth over most of the first half, but it’s probably heading towards a period of much slower growth. In economists’ opinion, Canada’s growth will be below 2% annualized during the second half of 2022 and into the next year.
“Growth can’t fully avoid the restraining affects of a slowing U.S. economy and the Bank of Canada’s rate increase campaign. We predict much cooler tendencies in the next quarters,” – Doug Porter, chief economist at BMO, noted.
As you know, the BoC has raised its key lending rate by more than 2% since March in attempt to slow a record high inflation. Moreover, at least one more 0.50% hike is expected on September 8.
The second-quarter annualized economic results turned out to be even higher than 4% predicted by the Bank earlier this month. They follow 3.1% growth reported in Q1, and it will definitely increase the confidence that the national economy needs even higher rates.
“The central bank remains on course to provide another non-standard rate increase at its next meeting,” – believes Andrew Grantham, an economist at CIBC.
Today, the global economy is facing the hit from growing energy costs. Meanwhile, Canada has been benefitting from higher oil, grain and natural gas prices. The strong first half of the year also can be explained by businesses reopening, following winter COVID lockdowns.
Canada showed the fastest economic growth amid Group of Seven countries in the first half of 2022. At the same time, the U.S. economy showed declines during both quarters.