Canada’s economy shrank in the second quarter as exports fell and businesses cut back on investment, though household and government spending helped cushion the decline.
The real gross domestic product fell 0.4 per cent between April and June, reversing much of the 0.5 per cent growth recorded in the first quarter. On a per-person basis, GDP also contracted 0.4 percent, reflecting the combined effect of slower growth and strong population gains.
Exports declined 7.5 percent following steep drops in passenger vehicles and light trucks, industrial machinery and equipment, and travel services. Import volumes slipped 1.3 per cent as lower purchases of cars and travel services were partly offset by higher demand for precious metals. Export and import prices both declined, pulling the terms of trade lower.
Business investment weakened during the quarter, falling 0.6 per cent overall. Spending on machinery and equipment tumbled 9.4 per cent, the slowest pace outside the pandemic since 2016. Investment in non-residential buildings also fell, though engineering structures posted a gain tied to offshore energy work.
Households increased their spending by 1.1 per cent, with demand strongest for new vehicles, food, restaurants and financial services. Disposable income rose just 0.3 per cent, suggesting families leaned on credit or savings to support higher consumption. Residential construction grew 1.5 per cent, led by apartment projects in British Columbia, while resale activity edged higher following a steep first-quarter drop.
Inventories provided another source of support as businesses accumulated more than $30 billion in goods, up from $10.8 billion in the previous quarter. Manufacturers, wholesalers and investors in gold accounted for most of the buildup, while auto dealers drew down vehicle stocks amid weaker imports.
Final domestic demand rose 0.9 per cent, rebounding from a decline in the first quarter. The figures underline a split in the economy, with households and governments sustaining spending even as trade and business investment weakened.