‘Data for Business’ is an effort of the Langley Chamber, in partnership with the Canadian Chamber’s Business Data Lab, to bring our members reports, stats, and analysis on economic and business data to help inform business and investment decisions. Read our latest update below:

The Canadian economy grew by 0.3% in June, marking a third consecutive monthly expansion and capping a strong second quarter. GDP by industry increased 0.9% over the quarter, with 17 of 20 major industries expanding. On an expenditure basis, real GDP rose 0.8% in Q2, or 3.3% at an annualized rate. The breadth of the expansion is particularly encouraging, with growth supported by both household demand and business activity rather than being concentrated in a handful of sectors.

In June, services-producing industries expanded by 0.4%, while goods-producing industries edged down 0.1%. Wholesale trade led the services-side growth, rising 1.7%, followed by retail trade at 1.4% and public administration at 0.3%. Wholesale activity benefited from a rebound in machinery, equipment and supplies, alongside gains among food, beverage and tobacco wholesalers.

Taken together, the Q2 numbers show an economy displaying greater resilience than many expected. Household spending remained firm, employment and compensation continued to support incomes, and businesses increased investment in machinery, equipment and engineering structures. The strength is therefore relatively broad-based across both the consumer and business sides of the economy.

Consumer Spending: Consumer resilience was also evident. Seven of nine retail subsectors expanded, with general merchandise retailers recording particularly strong growth. Spending also increased across discretionary categories including clothing, accessories, footwear and jewelry. This is consistent with the broader picture of households continuing to spend despite elevated prices and persistent economic uncertainty. Retail sales volumes increased 1.5% in June, further suggesting that the improvement was not simply the result of higher prices.

Manufacturing:  Manufacturing expanded by 0.6%, led by a sharp increase in machinery manufacturing. Gains in metals and transportation-related manufacturing provided additional support, while weaker petroleum and coal product manufacturing partially offset the increase. The performance of machinery manufacturing is noteworthy because, alongside stronger business investment, it points to firms continuing to expand productive capacity despite an uncertain trade environment.

Oil & Gas:  Oil and gas extraction declined 0.6% in June, its first monthly contraction of the second quarter, as a decline in oil sands extraction outweighed growth in conventional production. Weather and operational disruptions weighed on output. Despite the June pullback, oil and gas extraction remained one of the largest contributors to growth over the second quarter.

Implications

Statistics Canada’s advance estimate points to unchanged GDP in July, with strength in real estate and rental and leasing, as well as professional, scientific and technical services, offset by weakness elsewhere. While the estimate suggests that economic activity is holding up after a strong second quarter, it should be interpreted cautiously. Renewed uncertainty surrounding CUSMA negotiations could weigh on business investment, hiring and trade as the third quarter progresses.

The United States remains Canada’s largest trading partner, making the direction of trade negotiations an important test of how durable the current momentum will prove to be. Greater trade diversification provides some cushion, but cannot fully insulate Canadian businesses from renewed uncertainty in the U.S. relationship.
 
Commentary:

“In Q2, Canada’s economic growth has shown signs of resilience in the face of immense pressure, which is a relief and perhaps a reason for optimism. Strong second-quarter GDP growth, alongside an upward revision to Q1, has put recession concerns firmly to rest for now.   The rebound reflects resilience on both sides of the economy: businesses continue to invest as they look for opportunities to diversify into new markets, while household spending remains strong even on a per-capita basis. Combined with recent gains in employment, trade and consumer sentiment, the data could strengthen the case for a rate hike. However, renewed CUSMA uncertainty and geopolitical risks threaten that momentum. “   - Anupriya Gangopadhyay, Economist, Canadian Chamber of Commerce