Canadian Economy Grows at Annualized 4.9% Rate
Canada’s economy rebounded from recession in the second quarter, growing at an annual rate of 4.9% and bringing an end to one of the worst downturns since World War II.
Gross domestic product, the total output of goods and services in the economy, had fallen in four consecutive quarters before bouncing back by 1.2% between April and June this year, the federal agency Statistics Canada said Friday.
Gross domestic product fell 4.6% on an annualized basis in the first quarter.
“The recession is clearly over,” said Randall Powley, vice president of brokerage firm Scotia-McLeod Inc.
“Relatively few economists expect there to be a double dip in Canada,” Powley said, referring to fears the economy may slide again after showing initial signs of recovery.
“We had a strong quarter and we have clearly come out of (recession).”
Both exports and imports increased in the second quarter, in sharp contrast to previous quarters, the government agency said.
Canada officially went into recession in April, 1990, as unemployment soared and industrial production slumped, while inflation remained high mainly because of new taxes.
Industrialists blamed the high value of the Canadian dollar against the U.S. dollar for slowing exports to the United States, Canada’s most important trading partner.
Analysts said the economy received a shock from a free trade deal with the United States that has forced businesses in trade-dependent Canada to restructure to meet tougher competition.
But the recovery has started in interest-rate sensitive areas, such as housing and auto sales, as the central Bank of Canada eased interest rates.
“These are the early starters that reflect pent-up consumer demand. It’s pretty textbook,” said Susan Clark, chief economist with Richardson Greenshields of Canada Ltd.
Canada’s gross domestic product rose 0.1% in June after exceptionally strong growth of 0.4% in May and 1.1% in April, the government recording agency said.
The merchandise trade surplus rebounded to $2.62 billion ($3 billion in Canadian dollars) in the second quarter from $2.19 billion (C$2.5 billion) in the first quarter, led by auto products. The current account deficit remained unchanged from the previous quarter at $4.8 billion (C$5.5 billion).
The Conference Board of Canada, a leading private research group, said Friday that lower interest rates have helped automobile sales, while a gradual pickup in the U.S. economy is helping Canada’s trade performance.
“Increased demand south of the border is stimulating Canadian export growth, particularly for British Columbia lumber and Ontario and Quebec manufacturing products,” said Paul Darby, a Conference Board director.