Economists expect the Bank of Canada to move forward with another aggressive interest rate hike next week after the release of data showing the economy remained in relatively good shape during the second quarter of the year.
The Canadian economy grew at an annual rate of 3.3 per cent in the second quarter, Statistics Canada said Wednesday in its latest report on real gross domestic product.
For comparison, the economy grew by an annual rate of 3.1 per cent in the first quarter.
While the 3.3 per cent figure falls short of the agency's preliminary estimate of 4.6 per cent, BMO chief economist Douglas Porter said in a typical year, it would be considered above-average growth.
Tu Nguyen, an economist with accounting and consultancy firm RSM Canada, said there were few surprises in the GDP data when it's broken down into its components.
"We see pretty much what we had expected, which is strong business investment, a lot of spending by households on services, which again, it's not surprising as pandemic restrictions dropped," said Nguyen. "And on the flip side, we saw the housing sector not doing very well, which has been happening since the first interest rate hike that happened in March."
According to the federal agency, real GDP grew by 0.8 per cent in the second quarter, marking the fourth consecutive quarter of growth.
Statistics Canada also released its monthly report, which finds real GDP grew by 0.1 per cent in June after staying flat in May.
Porter said the latest GDP data is a "mixed bag" given some sectors showed weakness while others were in good shape.
"I think it just shows how ...volatile this economy is. And, you know, it doesn't lend itself to easy characterizations," Porter said.
Wednesday's report said businesses ramped up their investments in inventories, which served as the major contributor to growth. Businesses also increased their investments in engineering structures and machinery and equipment.
Meanwhile, household spending on semi-durable goods increased, with the rise driven by an increase in spending on clothing and footwear as more people headed back to the office.
At the same time, housing investment declined in the second quarter along with household spending on durable goods.
The Bank of Canada has called the Canadian economy "overheated" and has been combating high inflation with a series of interest rate hikes.
The central bank is hoping higher borrowing rates will slow down economic activity and bring inflation back to its target of two per cent.
With the annual inflation rate reaching 7.6 per cent in July, the Bank of Canada is expected to announce another supersized interest rate hike Sept. 7.
Nguyen said the consensus among central bankers around the world has been that inflation is broad-based, meaning prices are rising quickly across the economy, and therefore requires forceful action on their parts.
"I don't see the Bank of Canada deviate from that strategy moving forward. And I expect them to raise interest rates at every single meeting for the rest of the year," Nguyen said.
BMO is forecasting the central bank to raise its key interest rate by three-quarters of a percentage point next week, but Porter said he wouldn't be surprised if it opted for a more aggressive rate hike.
"I think in some ways, the bank once wants to keep the market on its toes a bit. And I think it also wants to show that it's planning on being very tough on inflation," Porter said.
Meanwhile, an early reading for July points to a contraction of 0.1 per cent as economists widely expect an economic slowdown ahead.
How much Canadians feel the slowdown will depend on their individual circumstances, Porter said, including what sector they're employed in and whether they're a borrower or saver.
Additionally, the Statistics Canada report showed wages were up two per cent in the second quarter, with Ontario and Alberta contributing the most to the national increase. Statistics Canada said the Atlantic provinces' wage growth for the quarter were almost double the national rate.
While disposable income rose for households, their savings rate declined from 9.5 per cent in the first quarter to 6.2 per cent, largely due to inflation. However, the savings rate remains well above pre-pandemic levels, which was 2.7 per cent at the end of 2019. While the report provides the aggregate savings rate, Statistics Canada noted that savings rates tend to be higher among those in higher income brackets.
"Although these estimates suggest ongoing resiliency in household net savings, inflationary pressures on consumption and trends in employee compensation will likely be key determinants of future outcomes," the agency said in its report.
This report by The Canadian Press was first published Aug. 31, 2022.
The Israeli military targeted a top Hezbollah figure in a strike on Beirut's southern suburbs on Friday, two security sources in Lebanon said, sharply escalating the year-long conflict between Israel and the Iran-backed group.
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A case involving stolen funds from a Saskatchewan business being used to purchase cryptocurrency will be heading back to the courts, thanks to a new decision by Saskatchewan's Court of Appeal.
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Two men from Barrie have been charged after a deadly shooting at a park in Keswick on Wednesday.
A growing group of brides and wedding photographers from across the province say they have been taken for tens of thousands of dollars by a Barrie, Ont. wedding photographer.
Ontario Provincial Police executed a search warrant in Walkerton.
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Standing up, speaking out, and showing solidarity — survivors and supporters gathered in the core to take back the night in Windsor. The city is just one of a growing list of communities that have declared intimate partner violence (IPV) an epidemic.
The Windsor Police Service (WPS) has seized over $56,000 in drugs and have arrested one suspect.
In a rare move, the Greater Victoria School District Board of Education has been slapped with a ministerial order from the province requiring it to update a student safety plan – drawing concern around political posturing leading up to an election.
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To appreciate why Mimi Vandermolen is so pleased to notice one particular vehicle she’s walking past, you need to know that seeing this many cars in one place would have been unimaginable when she was growing-up in the post-war Netherlands.
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The Red Bridge, a historic landmark in Kamloops, B.C., was completely destroyed by fire early Thursday morning.
Animal protection officers in British Columbia have rescued three pit bulls – including one that gave birth to 10 puppies – from a rat-infested home in Kelowna.
A Vulcan, Alta., man has been charged with a Lethbridge woman's murder after her body was found in the Oyen area.
A Lethbridge couple got a good reminder as to why you should keep your vehicle doors locked at all times.
Lethbridge residents who live near the police range can expect to hear plenty of shots fired Wednesday and Thursday.
A new community health profile in the Algoma District shows the area is significantly below provincial averages in a number of health metrics.
North Bay Police Service says one person has died following an industrial accident at the Ontario Northland Transportation Commission Rail Yard on Tuesday.
Three northern Ontario residents are charged with drug trafficking after the vehicle they were in got stuck along a bush road off Highway 17 on Monday.
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Jim Lester’s farm hopped on the cow-cuddling trend in early August, and his time slots have been pretty well sold out ever since.
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