Canada: GDP up but details mixed – RBC
Nathan Janzen, senior economist at Royal Bank of Canada, notes that the Canadian GDP increased 3.7% (annualized) in Q2 but the stronger-than-expected Q2 increase was entirely due to a huge 5.4 percentage point add to growth from net trade.
Key Quotes
“That more-than-reversed a big drag from net trade in Q1 – and is clearly unsustainable going forward, even without considering growing external headwinds from slower global growth, an escalating US-China trade war, Brexit uncertainty, etc. ‘Final domestic demand’ declined in Q2 as consumer spending growth slowed and business investment declined.”
“Still, the quarterly GDP numbers are often volatile, and surprisingly soft details from the Q2 report followed surprisingly strong details in Q1 (when final domestic demand jumped 3.2% and net exports were weak.)”
“From the Bank of Canada’s perspective, though, the Q2 report will do nothing to alleviate concerns that an increasingly uncertain external growth backdrop will slow the Canadian economy going forward. We continue to expect the Canadian central bank will follow other global peers with a rate cut. Probably not at next week’s policy decision but with the risks tilted to an earlier cut than the Q1-2020 move we have in our current base case.”
Author
Sandeep Kanihama
FXStreet Contributor
Sandeep Kanihama is an FX Editor and Analyst with FXstreet having principally focus area on Asia and European markets with commodity, currency and equities coverage. He is stationed in the Indian capital city of Delhi.
