Bank of Canada expects economic recovery in 3rd quarter.
After showing signs of growth for three consecutive quarters, Canadaâ€™s economy shrank in the second quarter of 2016 fiscal following the reduction in exports and disruption in oil production caused by wildfires in Alberta.
The Canadian economy shrank by 1.6 percent on a yearly basis slightly exceeding the market forecast of 1.5 percent. But, according to the figures released on Wednesday, the economy has made a comeback in June with 0.6 percent growth.
It was in the second quarter of 2009 that the country showed a decline in Gross Domestic Product (GDP) almost equivalent to the current figure. The economic growth dropped by 1.5 percent in 2009 when the country was experiencing the aftereffects of the global financial crisis.
The recovery is in line with the view of the Bank of Canada that expects economic recovery in third quarter.
“I think the Bank of Canada is still confident that exports will turn up and lead the economic expansion in the second half of the year,” Sal Guatieri, senior economist at BMO Capital Markets told Reuters.
A 4.5 per cent drop in exports was the main reason that led to the decline. The export of all types of goods including motor vehicles and consumer products registered a reduction in the quarter. The export of energy products, including crude oil and crude bitumen were declined due to the wildfires in northern Alberta.
Excluding the drop in the output of crude oil prices, the GDP would have increased by 0.1 percent said Statistics Canada.
Meanwhile, economists are of the opinion that the revival in June is expected to continue in next few months leading to better third quarter figures.
“The best news [in the GDP report] was that June GDP rebounded … and less than half of that [growth] came from the rebound in mining/oil/gas, as manufacturing also had a healthy gain,” CIBC chief economist Avery Shenfeld said in a commentary.
“All told, a quarter we will like to forget, and for the next few months, a more supportive Q3 will help us do just that,” he wrote.