• Although the faster-than-expected GDP growth in the second quarter comes on the heels of a downward revision to Q1, it is still the fastest pace of growth in three years. Is it time to drop the neutral bias at the BoC?

Much Better Sequential Growth

Real Canadian GDP grew at a 3.1 percent annualized rate in the second quarter which was better than the 2.7 percent consensus expectation. It was the fastest quarterly growth rate in almost three years. It bears noting that first quarter growth figures, which were already disappointing, were revised to an even slower growth rate of just 0.9 percent. It appears that the Canadian economy, like its neighbor to the south, had a rough start to the year, partly attributable to an unusually stormy and cold winter, but bounced back nicely in the second quarter.

In terms of the major components of GDP, the only noteworthy headwind for growth in the second quarter was a slower pace of inventory building which resulted in a 1.9 percentage point drag on headline GDP growth.

Business fixed investment spending, which had been negative in the first quarter, grew at a 2.8 percent annualized rate in the second quarter. The strength here was somewhat unexpected given indications of vulnerability. For example, the Ivey PMI was in contraction territory for two months of the second quarter, while manufacturing orders were lower, on average, in the second quarter when compared to the first. The fact that the Ivey returned to expansion territory in July and that orders are on an uptrend should support prospects for business spending in the current quarter.

Consumer spending increased just as it has every quarter without a miss since the economy began to bounce back from recession in 2009. The 3.8 percent annualized growth rate for consumer outlays lifted overall GDP by 2.1 percentage points.

With such strong consumer spending, imports grew at an 11.1 percent annualized clip in the second quarter, the fastest pace of import growth since 2010. Somewhat surprisingly, exports grew even faster and the net effect on GDP from trade was a boost of 1.7 percentage points.

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Analysis feed

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!

Latest Analysis

Latest Forex Analysis

Editors’ Picks

EUR/USD extends gains as ADP NFP disappoints with only 167K

EUR/USD is trading above 1.1850, extending its gains after ADP's private-sector report badly misses expectations with an increase of only 167,000 jobs in July. The greenback had already been falling with yields.


XAU/USD bulls unstoppable, renews life-time highs near $2040

With ‘buy the dips’ emerging as the main underlying theme behind the gold price action so far this week, the bulls flex their muscles further to record fresh all-time highs near $2040.

Gold News

GBP/USD trades well above 1.31 amid dollar weakness

GBP/USD is advancing towards this month high at 1.3169, recovering as the dollar retreats. The UK government is under scrutiny for its management of the virus crisis. US Services PMIs are eyed. The ADP NFP missed with 167K.


ETH/BTC on retreat, BTC recovery gains traction

ETH/BTC has topped at $0.03528 on Tuesday and retreated to $0.03448 by the time of writing. The cross has lost about 1% since the start of the day. The RSI on a daily chart reversed to the downside, signaling that the price is ready for a correction from overbought territory.

Read more

WTI hits fresh two-week highs near $42.50 ahead of EIA data

WTI (futures on Nymex) extends its winning-streak into the third straight day on Wednesday, as the bulls challenge the July high of $42.51.

Oil News

Forex Majors