- Avery Shenfeld, chief economist at CIBC World Markets
The worst expectations were confirmed as the Canadian economy slid into recession in the first half of the year for the first time since the Great Recession. Canada's economic output contracted 0.5% between April and June, following a revised downward decrease of 0.8% for the first quarter, according to Statistics Canada. However, the economy grew 0.5% on month in June, the strongest monthly reading since May 2014. The strength was seen in a number of areas of the economy, including the services sector, consumer spending and the labour market. Household consumption soared 2.3% on an annualized basis in the second quarter. Canadians spent more on cars, insurance, financial services, food, beverages and accommodation. Also, exports of goods and services recovered, climbing 0.4% after two straight quarters of drops. Contributing to the growth were exports of cars and parts, as well as crude oil and crude bitumen. In contrast, imports of goods and services plunged 1.5%, prolonging the negative trend from the previous quarter. The data comes ahead of the Bank of Canada's interest rate decision next week. The central bank has already cut its benchmark rate twice this year, from 1% in the beginning of the year to 50 basis points after the latest cut in July. The negative GDP data for the second quarter is unlikely to put additional pressure on the BoC to slash rates, as the negative growth was in line with the central bank's expectations.
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