The Canadian economy is likely to regain momentum after faltering in the second quarter of 2011, Central 1 Credit Union chief economist Helmut Pastrick said Wednesday.
The economy, as measured in gross domestic product, shrank for the first time since the end of the recession in mid-2009.
Statistics Canada said GDP contracted 0.4% between the first and second quarters of this year, when expressed in annualized terms. That's the weakest performance since the 3.7%decline seen in the second quarter of 2009.
Stats Can said lower GDP levels were mostly due to a 2.1% decline in exports, noting that domestic demand was up 0.7%.
The export decline, which followed two quarters of gains, was led by a 6.7% drop in energy shipments out of Canada. Oil-and-gas extraction was down 3.6%.
"Certainly the second quarter number was affected by those Alberta wildfires, and the shutdowns that occurred in the gas sector - gas and oil," Pastrick said in a telephone interview. "And of course the manufacturing sector did see a drop because of the supply chain disruption out of Japan [after a catastrophic earthquake on March 11].
"These two events pulled down the May GDP number. There was a subsequent bounceback, if you will, in June. Overall though, the second quarter was down from the first quarter. I don't think we're headed for a recession, but that's not my call."
Pastrick said he expects Stats Can to report a GDP uptick for the July-September period and believes the Canadian economy will continue to be stronger than that of the United States.
"I would look for the third quarter GDP number to be higher than the second quarter - probably something in the 1.5% range for Canada for the annualized rate.
"Certainly the U.S. is still struggling. It's a weak growth environment and even with some pickup in Q3 it will likely still be sub-par growth."
Two straight quarters or more of economic contraction meet the commonly accepted criteria for a recession in Canada. However, TD Economics economist Diana Petramala said that's unlikely to happen this time around.
"Economic growth is likely to pick up over the second half of 2011 as temporary factors fall out of the equation," she said in a research note.
Benjamin Reitzes of BMO Capital Markets said Canadian economic growth would likely improve to a "mediocre" rate of about two per cent, annualized, during the second half of this year.
Stats Can noted GDP growth of 0.2% in June, which CIBC World Markets chief economist Avery Shenfeld called "evidence of a positive turn of events heading into [the third quarter], and we expect healthy readings for July given the improved U.S. tone that month."
Finance Minister Jim Flaherty, speaking to reporters in Toronto, stressed the fact that Canada's economic fundamentals are sound.
"We had a stronger first quarter than expected this year. That is why I'm able to say that broadly we're on track over the course of the plan for the fiscal year. The month of June was quite positive," Flaherty said.
"The good news in today's data release is that our domestic economy remains strong, with consumption, and particularly business investment, continuing to expand."
Stats Can said consumer spending was up 0.4% in the second quarter, while goods-production expanded 0.8%.
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