Canada’s economy almost certainly accelerated in the second quarter of this year, but most observers don’t expect the growth figure coming out this week will change the hard-to-impress minds at the Bank of Canada.
Statistics Canada will publish gross domestic product data for both June and the second quarter as a whole on Friday. It will be the last major economic report before the Bank of Canada’s next scheduled decision on interest rates and monetary policy, on Sept. 3.
Several recent stronger-than-expected economic indicators, notably in trade and home construction, have led private-sector economists to revise their second-quarter growth expectations upward in the past few weeks. A recent Bloomberg survey of economists pegged the consensus estimate for real (inflation-adjusted) GDP growth for the quarter at an annual rate of 2.6% up from their 2.2% call in a July survey.
That’s not only a substantial upgrade from the economy’s sluggish 1.2% growth pace in the first quarter. It’s also a touch stronger than the Bank of Canada’s most recent estimate of 2.5%, published last month. Since the Bloomberg survey was completed in mid-August, surprisingly strong June manufacturing and retail sales reports, and a large upward correction to the July employment survey have added to the optimism about the economy’s strength.
But the most encouraging factor has been the resurgence of exports. Canada generated a trade surplus of $1.9 billion in June, the strongest month in two and a half years. Together with upward revisions to the prior two months’ data, trade showed a second-quarter surplus of $2 billion, the biggest since 2011.
Economists said the central bank might soften its gloomy tone a bit if exports’ contribution to the second-quarter numbers is particularly impressive. The bank has identified a recovery in exports as one of its pillars for a healthy Canadian economic recovery.
Still, the bank sees Q2 strength as driven in significant part by a bounce-back in demand after a harsh winter that stifled economic activity – including trade – in the first quarter. When it looks at the first half of the year as a whole, it will see an economy that has underperformed.
