This despite the deep and ongoing collapse of global oil prices that has plunged resources-dependent provinces, particularly Alberta, in recession – and was the primary force that pushed Canada into an economic downturn in the January-to-March period and for first two months of the second quarter, meeting the technical definition of a recession.
Advertisement
Statistics Canada reports the national gross domestic product increase in July and June is linked largely in part to growth in the industrial sector.
That makes the deficit equivalent to 3.6 per cent of GDP, down from 5.2 per cent in the first quarter.
Meanwhile, household data was stronger in the second quarter, with disposable income increasing 2% between Q1 and Q2 this year, while households’ saving ratio was estimated to be 4.7% in Q2, compared with 4% in Q1.
The Bank of England is expected to follow the U.S. Federal Reserve when it decides to raise interest rates from their current historic lows – a move a few traders expect as early as October.
In another welcome boost for the economy, official figures also showed Britain’s current account deficit narrowed sharply in the second quarter thanks to a surge in exports and a growth in earnings on investments overseas.
A Treasury spokesman said: ‘These new figures from the ONS show that the United Kingdom was the fastest growing G7 economy in both 2013 and 2014.
But the sector is still 1.8 per cent smaller than it was a year ago.
While the economic recovery does not look to have maintained a similar pace in the third quarter, with the Markit PMI pointing to a quarterly growth of 0.5%, analysts expect the United Kingdom economy to shift through the gears again.
CIBC, for example, pegs annualized growth for the quarter at 2.7 percent, above the Bank of Canada’s 1.5 percent.
Howard Archer, chief United Kingdom and European economist at IHS Global Insight, said: “The slight downward revisions to year-on-year GDP growth have little implications for monetary policy.
Advertisement
It might even suggest we might be on the higher side of that range”, said Benjamin Reitzes, senior economist and foreign exchange strategist at BMO Capital Markets.
