Canada's economy grows at its fastest pace in a year as exports surge

  • Canada’s GDP grew at the fastest pace in a year between April and June.
  • An uptick in exports and consumer spending helped boost growth.
  • The data comes ahead of Bank of Canada meeting next week.

Canada’s economic growth accelerated in the second quarter at the fastest pace in a year, driven by a sharp increase in exports and consumer spending.

Gross domestic product expanded at an annualized pace of 2.9% from April to June, Statistics Canada said Thursday, up from 1.4% growth in the first quarter. The figure missed economist expectations for 3% growth, but beat Bank of Canada estimates of 2.8%.

Household spending rose 0.6%, twice the pace of the first quarter and reversing a downward trend over the previous three quarters, helped by a 0.8% rise in outlays on services.

Exports notched the largest advance in more than four years at 2.9% on a non-annualized basis, largely thanks to increased shipments of energy products, consumer goods and pharmaceutical products.

The data comes ahead of a central bank meeting next week, where economists expect the Bank of Canada to hold the benchmark interest rate steady. The central bank has hiked rates four times since last July, with the most recent coming last month.

Stephen Brown, senior Canada economist at Capital Economics, said the strong pace of growth in the second quarter will embolden policymakers. But he added the central bank will also be keeping a close eye on NAFTA negotiations between the US and Canada this week. President Donald Trump had threatened to terminate the 24-year-old agreement and to hit Canada with auto tariffs.

“Nevertheless, the Bank of Canada is still likely to keep to its commitment to proceed gradually with interest rate rises, by remaining on hold next week before hiking in October,” Brown said.

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