Canadian economy grew at a rate of 3.3 per cent in the second quarter, StatCan says

The Canadian economy grew at an annual rate of 3.3 per cent in the second quarter, new figures from Statistics Canada show, but momentum may be slowing.

This was the fourth consecutive quarterly increase in real gross domestic product (GDP).

GDP from April to June increased at an annual rate of 3.3 per cent, compared to 3.1 per cent for the first quarter of 2022, Statistics Canada said on Aug. 31. The agency’s monthly estimate for July showed a contraction of 0.1 per cent.

StatCan’s Aug. 31 report showed the economy expanded for a fourth consecutive quarter, driven by increased businesses and household spending. But growth in the second quarter was moderated by declines in housing investment and household spending on durable goods and by a rise in imports that exceeded exports. Final domestic demand rose by 0.7 per cent, following a 0.9 per cent increase in the first quarter.

According to the federal agency, real GDP grew by 0.8 per cent in the second quarter, with the economy staying flat in May before seeing growth of 0.1 per cent in June.

Growth in the second quarter is down from the agency’s preliminary estimate of 4.6 per cent annualized growth.

The Aug. 31 report noted that businesses ramped up their investments in inventories, which served as the major contributor to growth. Businesses also increased their investments in engineering structures and machinery and equipment.

Meanwhile, household spending on semi-durable goods increased, with the rise driven by an increase in spending on clothing and footwear as more people headed back to the office. At the same time, housing investment declined in the second quarter along with household spending on durable goods.

Wages were up two per cent in the second quarter, with Ontario and Alberta contributing the most to the national increase. Statistics Canada said the Atlantic provinces’ wage growth for the quarter were almost double the national rate.

While disposable income rose for households, their savings rate declined from 9.5 per cent in the first quarter to 6.2 per cent, largely due to inflation. However, the savings rate remains well above pre-pandemic levels, which was 2.7 per cent at the end of 2019. While the report provides the aggregate savings rate, Statistics Canada noted that savings rates tend to be higher among those in higher income brackets.

With projects such as Kitimat Liquified Natural Gas in British Columbia and higher capital spending in oil and gas in Alberta, businesses continued to invest in engineering structures in the second quarter. “After periods of reduced investment in 2019 and during the pandemic, the 3.6 per cent increase in the second quarter of 2022 was the seventh consecutive quarterly increase,” the agency said. “Owing to the resurgence of travel demand, business investment in machinery and equipment rose 4.5 per cent in the second quarter; the key contributors to growth were aircraft, trucks, buses, and other motor vehicles.”

“Although these estimates suggest ongoing resiliency in household net savings, inflationary pressures on consumption and trends in employee compensation will likely be key determinants of future outcomes,” the agency said in its report.