INSTANT VIEW-Canada's economy grows by 2.1% annualized in second quarter, beats forecast

Adds more comments

TORONTO, Aug 30 (Reuters) - Canada's economy grew faster than expected in the second quarter, led by government expenditure, increased business investments and consumers spending more on services, data showed on Friday.

The annualized gross domestic product on a quarter on quarter basis rose 2.1%, Statistics Canada said, adding, however, that on a per capita basis the GDP continued to contract for a fifth consecutive quarter.

Market reaction: CAD/

LINK: https://www150.statcan.gc.ca//daily-quotidien/240830/dq240830b-eng.htm

COMMENTS

DOUG PORTER, CHIEF ECONOMIST, BMO CAPITAL MARKETS

"No huge surprise here. The quarterly were just a touch stronger than expected. Consensus was almost that it will be at 2%. It is far more than what the Bank of Canada had expected back in July but what might offset that to some extent is that the Bank of Canada had also expected a pick up in the third quarter, and based on monthly it does look the economy is getting up to the strong growth that they had anticipated."

"So I would say from the Bank of Canada perspective it is a roughly report. I don't think it changes anything in terms of bigger picture. The economy is still managing to grow but the growth is fairly unimpressive."

ROBERT BOTH, CANADIAN MACRO STRATEGIST, TD SECURITIES

"The Q2 was a little bit stronger than we'd expected but the details were quite a bit softer than that, even with the positive surprise."

"The strength (in household spending) we saw over Q4 and Q1, that's likely to be sustained over the rest of 2024 and 2025. With the consumer accounting for such a large share of total economic activity, that does reinforce that there is a limit to how quickly the economy is going to expand over the second half of this year."

ANDREW GRANTHAM, SENIOR ECONOMIST, CIBC CAPITAL MARKETS

"Growth in the Canadian economy was modestly better than expected in Q2, but weak momentum heading into the third quarter gives ample reason for the BoC to continue cutting interest rates."

"Momentum heading into Q3 was much weaker than anticipated, with June GDP printing flat on the month - consensus +0.1% - and the advance estimate for July pointing to a further stall that month as well. That leaves early tracking for Q3 at around 0.5% annualized, allowing for modest growth in August and September, which would be well below the 2.8% forecast from the Bank of Canada's MPR."

"Because of that we still see the Bank of Canada reducing interest rates by 25 bp (basis points) at each remaining meeting this year."

(Reporting by Fergal Smith and Divya Rajagopal)

((fergal.smith@thomsonreuters.com; +1 647 480 7446;))