September 1, 2015 / 12:48 PM / 2 years ago

Instant View: Canada hit by recession as economic growth shrank in Q2

TORONTO (Reuters) - Canada's economy contracted by an annualized 0.5 percent in the second quarter, according to Statistics Canada data on Tuesday, indicating a recession in the first half of the year.

COMMENTARY:

PAUL FERLEY, ASSISTANT CHIEF ECONOMIST, ROYAL BANK OF CANADA:

"We're seeing continued declines, though fairly marginal weakness in the quarter, but clearly cutbacks in investment in energy continued to weigh on the growth numbers."

"The monthly data showed a sharp bounce bank in June, consistent with indications that exports rebounded in the month, which points to a likely return to positive growth in the third quarter. The numbers suggest maybe growth around 2 pct in the third quarter."

"Certainly markets were braced for a decline in the quarter and that was confirmed, but it was not quite as large a drop as had been expected. But the strength in June GDP is a bit of an upside surprise, there was an expectation that June would return to positive growth but only by 0.2 percent, so it was more than double that, suggesting the declining activity won't persist. The market might take some comfort from that, and as a result there may be less need for the Bank of Canada to introduce any further ease into the system."

"The weakness in the first half of the year does appear to be fairly narrowly based, with weakness in the energy sector weighing on investment activity. We thought we'd see more support from exports in the second quarter but that didn't happen."

DEREK BURLETON, DEPUTY CHIEF ECONOMIST AT TORONTO-DOMINION BANK:

"It's largely as expected, it came in a touch better. There's something in the report for everyone ... despite the technical recession materializing, it does look like the Canadian economy is jumping back, is rebounding strongly in the third quarter. The June numbers are comforting in that regard. We may very well be revising our third quarter up."

"I don't see this having a material impact (on the Bank of Canada) ... I don't think we learned anything incredibly new today from the data."

"To me this report points to the Bank of Canada sitting on their hands. They'll wait and see how the third quarter's unfolding to get more information. But it does look like the weakness in the first half is in the review mirror. The economy's coming back. It certainly gives them something to chew on. We're comfortable with a stable Bank of Canada rate outlook."

DOUG PORTER, CHIEF ECONOMIST, BMO CAPITAL MARKETS:

"The headline number is really no surprise. I think we have to take into account that the first quarter was revised down a little bit, so on balance it's fairly close to expectations or maybe just a touch better."

"Maybe the more interesting thing is the monthly number, which shows that the string of declines was decisively broken in June, and sets the third quarter off on a reasonably good footing, and also suggests that the two quarters of decline string will likely be broken in the third quarter, if the June reading is any indication."

"The second quarter is a little bit weaker than what they expected in July, but not materially so. If it had been as weak as -1 or worse, I think that would have been a big disappointment to (the Bank of Canada), but you know, missing by half a percent is just not that big of a deal."

Reporting by Allison Martell and Solarina Ho; Editing by Jeffrey Hodgson

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