TORONTO (Reuters) -Canada’s economy contracted in the second quarter by a much larger degree than anticipated on an annualized basis as U.S. tariffs squeezed exports, but higher household and government spending cushioned some of the impact, data showed on Friday.
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JIMMY JEAN, CHIEF ECONOMIST AT DESJARDINS GROUP
“It’s a mixed bag… because when we look into the details, it’s not a report that’s screaming a recession has started in the second quarter. Now it doesn’t mean that there might not be more pain ahead on the domestic side in later quarters, but this is really uniquely focused on exports.”
“Inflation surprise in latest report, and ever since we’ve had that news of reduction in counter tariffs. All those elements joined together make a pretty strong case to resume cutting rates in September.”
DEREK HOLT, VICE PRESIDENT OF CAPITAL MARKETS ECONOMICS AT SCOTIABANK
“The headline number is the sticker shock is pretty large, I mean the GDP across the gauge is all disappointing, but I think the devil is in the details. Key to me is that the domestic economy performed very strongly. So the measure that I look at is the final domestic demand, it adds consumption, investment to government spending. It was up 3.4% quarter over quarter, annualized in inflation adjusted terms.”
“If anything they have even weaker case to be cutting rates because you are seeing that strength in the domestic economy over which monetary policy has greater influence than the volatility of trade and inventory numbers. So I still want to see job’s data and CPI report after that before coming to a hard decision (on rate cut possibilities).”
(Reporting by Nivedita Balu and Divya Rajagopal; Editing by Caroline Stauffer)
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