Canada officially in a recession as GDP shrinks 0.5% in second quarter – by John Shmuel (National Post – September 1, 2015)

The National Post is Canada’s second largest national paper.

Canada’s economy contracted by 0.5 per cent in the second quarter, Statistics Canada revealed Tuesday, officially putting the Canadian economy in recession for the first half of the year.

Statscan also revised its first quarter GDP reading down to 0.8 per cent, from an earlier report of 0.6 per cent. A technical recession is defined as two back-to-back quarters of economic contraction.

Economists polled by Thomson Reuters had forecast that Canada’s economy would contract by 1.0 per cent in the second quarter.

While growth overall for the first half was weak, the second quarter ended with a strong handoff — GDP grew by 0.5 per cent in June, the strongest monthly reading in more than a month. Economists had expected growth of 0.2 per cent.

“The momentum registered in June is consistent with our view that Q3 will provide a breather as the economy,” said Avery Shenfeld, chief economist at CIBC World Markets.

Most of the damage in the second quarter came from a decline in business capital spending and inventory accumulation, which economists had expected as Canada deals with the fallout from a collapse in oil prices.

The economy did not shrink as much as expected, however, as household consumption rose for the second straight quarter. But while consumers helped prop up the economy, they did so while drawing down their savings — the savings rate declined from 5.2 per cent to four per cent in Q2.

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