Canada’s economy shrank in the second quarter for the first time since the recession two years ago, as a high dollar boosted imports and curbed exports while natural disasters interrupted energy and automobile production.
Gross domestic product fell at a 0.4 percent annualized pace during the April-June period following a 3.6 percent gain in the first three months of the year, Statistics Canada said today in Ottawa. Economists surveyed by Bloomberg forecast no growth in the quarter, based on the median of 23 responses, with nine calling for an expansion and six for a contraction.
The world’s 10th largest economy joined Japan in shrinking in the second quarter, reflecting weakness in the U.S. and Europe, its biggest trading partners. The report adds pressure on Bank of Canada Governor Mark Carney to keep his policy interest rate at 1 percent at the Sept. 7 announcement, with some investors betting he may need to cut borrowing costs.
“No matter what, we are getting growth that isn’t going to be going anywhere for some time,” said Derek Holt, Scotia Capital’s vice-president of economics in Toronto, by telephone.
“The Bank of Canada has full reason to remain parked on hold for at least the next year or so,” Holt said. “When they do start to raise interest rate, I can’t see them doing more than capping off at around 2 percent into 2013.”
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