Canada’s Economy Surprises with 2.1% Growth in Q2

The Canadian economy has defied expectations, growing by 2.1% on an annualized basis in the second quarter, driven by increased public spending, business investment, and household spending on services. This growth surpasses the predicted 1.5% increase by analysts.

According to the national statistics agency, the GDP per capita, however, continued to decline for the fifth consecutive quarter. The news comes ahead of the Bank of Canada’s monetary policy announcement next week, with many expecting a third consecutive reduction in the key lending rate.

In July, the Bank of Canada fixed the rate at 4.5%, citing easing inflationary pressures. Desjardins analyst Royce Mendes noted that the 2.1% growth in GDP "beat both private sector economists’ expectations and the Bank of Canada’s forecast." However, Mendes also pointed out that household spending growth remained slow, with Canadians continuing to save a significant portion of their incomes.

The government’s spending increased by 1.5% in the second quarter, largely due to wage increases for employees. The statistics agency also reported a decline in exports of gold, passenger cars, and light trucks, while exports of refined petroleum products were moderated by higher exports of crude oil and bitumen.

Economic growth for the first quarter was revised to 1.8%, up from the initial 1.7% announced in May.