Canada's Surging Economy Beats Expectations Amid Rate Cut Anticipations

Canada's economy grew faster than expected in Q2, with a 2.1% rise in annualized GDP, led by government spending and business investments. Despite per capita GDP contracting for the fifth consecutive quarter, financial markets expect a rate cut, driven by rising unemployment and mortgage renewals. The Bank of Canada’s focus appears to be shifting towards economic growth.

Canada's economy grew faster than expected in the second quarter, with a 2.1% increase in annualized GDP, primarily driven by government expenditure and increased business investments, according to data released on Friday.

Despite the overall growth, GDP per capita continued to contract for the fifth straight quarter. Analysts had forecast lower GDP growth, but this latest report has increased the likelihood of the Bank of Canada (BoC) cutting its benchmark rate for the third consecutive time on Sept. 4.

Financial markets now see an 80% chance of a 25 basis point rate cut, up from 77% prior to the new data. Rising unemployment and upcoming mortgage renewals are adding pressure on the BoC to lower policy rates. The Canadian dollar saw slight gains, rising 0.1% to C$1.3467 against the U.S. dollar.

(With inputs from agencies.)