Canada's economic growth rate slowed more sharply than expected in the second quarter on weaker consumer spending and trade performance, fueling expectations the Bank of Canada's rate hikes will be gradual.
Gross domestic product grew 2% at annual rates, sharply down from 5.8% in the first quarter and also down from 4.9% in the fourth quarter of last year, Statistics Canada said on Tuesday. The agency revised its first-quarter figure down from 6.1% reported initially.
Analysts had predicted 2.5% annualized GDP growth in the March-June period.
In the month of June, the economy grew 0.2% as expected, mainly on the strength of manufacturing.
Consumer spending had been the main driver of Canada's rapid rebound from a mild recession, but it moderated in the second quarter to 0.7% growth from a 1.0% gain in the first quarter as Canadians bought fewer cars and the housing market cooled, Statscan said.
The sputtering U.S. economy dampened exports, which advanced 1.5% compared with 2.6% in the previous quarter. Imports grew at more than twice that pace.
On the positive side, business investment in machinery and equipment made a long-awaited comeback and was a main driver of growth with the biggest quarterly gain since 2005 at 3.5%. A buildup of inventories and expanded output in mining and manufacturing also drove growth in the quarter.
