'A longer road to recovery:' Canada's economy shrinks, catching economists by surprise

 

A pedestrian wearing a mask walks past COVID signs on a store in downtown Toronto in May. The third wave of the virus hit the economy harder than economists thought. PHOTO BY PETER J THOMPSON/NATIONAL POST

The economy contracted 0.3 per cent between April and June, or 1.1 per cent on an annual basis, Statistics Canada reported on Aug. Adding to the dismal report, the federal agency delivered preliminary data for July that showed gross domestic product declined 0.4 per cent, a worrisome start to the third quarter. It’s the first quarterly drop in GDP since the second quarter of 2020, which saw the economy contract 11.3 per cent, or 38 per cent annualized. The data completely missed economists’ estimates, which had anticipated growth of 2.5 per cent for the period and quieted initial optimism about broader business re-openings as much of the country exited the third wave of the COVID-19 pandemic.

Homeownership transfer costs, which includes all costs associated with the sale of a home, declined 17.7 per cent in the quarter. Exports also experienced negative growth in the quarter, dropping four per cent. At the same time, business investment grew 5.7 per cent in the second quarter but was not enough to recover the losses in housing and exports.

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Source: Bianca Bharti | Financial Post