Canada Q2 GDP +3.7% vs +3.0% expected

Author: Adam Button | Category: News

Second quarter 2019 GDP highlights:


  • Best quarter since Q2 2017
  • Q1 was +0.4% (revised to +0.5%)
  • June GDP +0.2% vs +0.1% expected
  • May GDP was +0.2%
  • GDP +1.5% y/y
  • Exports +13.4% in Q2 -- fastest pace since 2014
  • Household savings rate rises to 1.7% vs 1.3% prior
  • Business gross fixed capital formation -6.4% vs +4.9%
  • Business non-residential investment -16.2% -- biggest drop since 2016
  • Household consumption +0.5% -- weakest since 2012 (prior was +2.9%)
  • Gov't consumption +2.5%
  • BOC forecast was 2.3%
This really ties the Bank of Canada's hands. That's a great reading and the Canadian dollar is jumping.

There are some caveats. Both the consumer and business investment were weak and those are often forward-looking indicators. On business non-residential investment, the 16.2% fall comes on the heels of a 14.4% rise in Q1 but both the final two quarters of 2018 were also weak so the trend is poor.  Statistics Canada notes a caveat on the drop: "The decrease was due mainly to a 9.3% decline in machinery and equipment investment, largely attributable to a 61.1% decrease in aircraft and other transportation equipment."

The consumer is also weak but the latest data showed a jump in retail sales in July so the Bank of Canada could see it either way.

Percentage contributions:
  • Traded added 4.1 pp
  • Business non-residential investment cut 1.64 pp
  • Household consumption added 0.3 pp
  • Government added 0.5 pp
  • Inventories cut 1.1 pp
Here's Andrew Kelvin, chef Canada strategist at TD Securities:

"It was a bit of a mixed report. Obviously the headline number is quite strong but essentially all the growth came from next exports, which is not going to be repeatable at nearly this level of robustness going forward. I don't think this is nearly as positive as the headline suggests... just given the worsening global sentiment and the fact that we are seeing household spending slow quite a bit more markedly than expected, I do think there are things to be concerned about here."
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