June output was on track for a slight increase of 0.1 per cent after a delay in May, Statistics Canada said on Friday. That follows three months of better growth between February and April that helped fuel a strong expansion in the second quarter, which the agency estimated at about 4.6 percent year-on-year. The numbers paint a picture of an economy that was hot for most of the first half, but is likely entering a period of much slower growth. Economists expect Canada’s growth rate to slow below 2 percent annually in the second half of this year and into 2023. “Growth cannot fully escape the drag of the slowing U.S. economy and the Bank of Canada’s aggressive rate hike campaign, and we look for much cooler trends in the coming quarters,” said Doug Porter, chief economist at the Bank of Montreal, in his report. to investors. The Bank of Canada has raised its key policy rate by more than two percentage points since March to slow four-decade high inflation and is expected to raise it by at least one more point on Sept. 8. The second-quarter growth number was even stronger than the 4 percent annual rate estimated by the central bank earlier this month and represents an acceleration from 3.1 percent growth in the first quarter — which will only build confidence that the economy needs higher rates. “The Bank of Canada is still on track to deliver another non-standard rate hike at its next meeting,” Andrew Grantham, economist at Canadian Imperial Bank of Commerce, said in a report. The Canadian dollar was little changed at $1.2822 per US dollar at 10:42 am. in Toronto trading. Yields on two-year Canadian government bonds rose about 2 basis points to 2.944%. While the global economy has been hit hard by rising energy costs, Canada has benefited from higher oil, grain and natural gas prices. The strong first-half pace also reflects the effects of reopening earlier this year, following severe COVID-related lockdowns last winter. Canada was the fastest growing Group of Seven economy in the first half of this year. In contrast, the US economy shrank in both quarters. The full quarterly economic accounts in Canada will not be released until August 31. In May, growth in service-producing industries was offset by declines in goods-producing industries, particularly construction and manufacturing, the statistics office said. The construction sector was hit by widespread strikes during the month. Advance data for June shows a rebound in construction and manufacturing. An average estimate in a Bloomberg survey of economists had expected a 0.2% decline in May.
