By Ketki Saxena
Investing.com -- Data released by Statistics Canada earlier today indicates a slowdown in Canada's economic growth, with an increase of just 1 percent in Q2, falling short of the Bank of Canada's predictions and significantly less robust than the 3.1 percent surge witnessed in Q1.
This trend continues from May's modest expansion of 0.3 percent.
Taking into account all monthly gains including April’s minimal rise of 0.1 percent, annualized growth is hovering around 1 percent for Q2.
Marc Ercolao, a TD (TSX:TD) Economist, notes that "Since April, GDP data has been impacted by a series of transitory shocks whose net effects make the data more difficult to interpret."
These include the government's grocery rebate, and the effects of the B.C. Port strikes.
"Looking ahead, headline GDP figures may continue to be skewed by the government’s grocery rebate and the effects of the B.C. port strike in July."
Regardless of these shocks however, the Canadian economy is slowing - coming in much lower than the Bank of Canada's expectations for a 1.5 percent growth rate, and well below Q1 numbers of 3.1 percent growth.
The Bank of Canada expects economic growth to continue to moderate, remaining at one percent throughout the second half of this year and the first half of 2024. as higher interest rates will likely suppress household expenditure and business investments while weak foreign demand amidst a global downturn limits export expansion.
Given that the interest rate hikes appear to be working - after a long and arduous rate hike spree, Ercolao forecasts that this data will be enough to bring the Bank of Canada back to its stance of a conditional pause moving forward.
Ercolao notes, "All said, slowing growth appears to be in the cards for the Canadian economy; we believe this will suffice BoC (Bank Of Canada) to remain stationary at its subsequent meeting."