Canada: Growth accelerated sharply in the second quarter - NBF

According to National Bank of Canada’s analyst, Krishen Rangasamy, the Canadian economy bounced back during the second quarter but warns that Q3 won’t be spectacular.

Key Quotes:

“Canada’s GDP expanded at an annualized pace of 2.9% in the second quarter of 2018. That was below the 3.1% expected by consensus but close to the Bank of Canada’s estimate of 2.8%. The prior quarter’s growth was revised up marginally to 1.4%.”

“After a slow start to the year, Canada’s economy bounced back sharply in the second quarter as surging exports complemented the ongoing resilience in domestic demand. The solid labour market (which lifted real disposable incomes) coupled with a drop in the savings rate helped boost consumption spending.”

“The continued recovery of business investment is also encouraging, as is the drag from inventories, the latter likely helping future production via restocking. But don’t expect another spectacular quarterly GDP growth print in Q3.”

“Consumption growth could also soften after the decline in the savings rate. As such, we wouldn’t be surprised to see GDP growth soften to less than 1.5% annualized in Q3. All in all, while positive, the Q2 GDP growth print ─ which was close to the Bank of Canada’s estimate of 2.8% ─, is unlikely to hasten the central bank into tightening monetary policy.”