Canada’s economy shrinks 11.5 percent q-o-q in Q2

Statistics Canada announced on Friday that the country’s gross domestic product (GDP) rose 6.5 percent m-o-m in June after a revised 4.8 m-o-m advance in May (originally a growth of 4.5 percent m-o-m).

That was above economists’ forecast for an increase of 5.6 percent m-o-m.

In the second quarter of 2020, the Canadian GDP plunged 11.5 percent q-o-q, following a 2.1percent q-o-q growth in the first quarter. That was the sharpest drop since quarterly data were first recorded in 1961.

According to the report, the q-o-q decline in GDP reflected sharp decreases in household spending, business investment, and international trade owing to widespread shutdowns of non-essential businesses, border closures, and restrictions on travel and tourism in response to the COVID-19 pandemic. Household spending dropped 13.1 percent q-o-q due to substantial job losses and limited opportunities to spend because of closures of stores and restaurants and restrictions on travel and tourism. Meanwhile, business investment fell 16.2 percent q-o-q, reflecting limited construction activities, plant closures, low oil prices and heightened uncertainty. Export volumes declined 18.4 percent q-o-q and import volumes plunged 22.6 percent q-o-q, as major trading partners' economies shrank owing to their adoption of measures to contain the pandemic.

Expressed at an annualized rate, Canada’s GDP tumbled 38.7 percent in the second quarter, the most on record, after an unrevised 8.2 percent decrease in the previous quarter, better than economists’ forecast of 39.6 percent contraction.