Canada's Economy Outpaces Expectations Despite High Interest Rates

Canada's economy experienced a surprising growth spurt in the second quarter of 2023, surpassing the Bank of Canada’s forecasts. Despite high interest rates, sectors like manufacturing and oil transportation saw significant gains. However, retail and wholesale trades remain sluggish, tempering overall economic expansion.

Canada's economy gained unexpected momentum in the second quarter, exceeding Bank of Canada growth forecasts, Wednesday data revealed. Despite high interest rates, manufacturing and oil transportation sectors registered notable gains.

Statistics Canada reported a 0.2% growth in May GDP, with preliminary June estimates suggesting a 0.1% rise, resulting in a quarterly growth rate of 2.2%. BMO Capital Markets Chief Economist Doug Porter highlighted the economy's precarious balance, "just staying out of serious trouble."

The Canadian dollar strengthened following the GDP data, while bond yields rose. Money markets are now anticipating an 86% chance of a 25 basis point rate cut on Sept. 4. Analysts suggest the recent growth may be driven by seasonal factors rather than sustained momentum.

(With inputs from agencies.)