Canada Slips Into Contraction As U.S. Powers Ahead

(MENAFN- The Rio Times) Fresh data from Statistics Canada shows the Canadian economy shrinking in the second quarter, confirming that momentum has slowed sharply. Output fell 0.4% compared with the first quarter.

On an annualized basis, the economy contracted 1.6% after expanding 2.0% earlier this year. Growth over the past year slowed to just 1.2%, down from more than 2% before.

Monthly figures show the weakness is not a one-off. GDP fell 0.1% in June, and July brought only a modest 0.1% gain. That leaves Canada entering the third quarter with little momentum.

Prices in the national accounts are also flat. The GDP implicit price index showed 0.0% growth in the quarter, compared with 0.7% before. That indicates easing cost pressures but also points to weak demand.

Government finances stand out as the only positive. Ottawa posted a C$3.6 billion ($2.9 billion) budget surplus in June, a swing from a small deficit a year earlier.



The cumulative federal shortfall narrowed to C$3.3 billion ($2.5 billion), from C$6.5 billion over the same period last year. The contrast with the United States is striking.

While Canada contracts, U.S. GDP grew at a 3.3% annualized rate in the second quarter, powered by strong household spending.

The gap underscores how dependent Canada is on exports, investment, and commodities, which remain soft. The story behind the story is that Canada's discipline on its budget has not translated into stronger growth.

Businesses face weaker demand at home and abroad, while consumers show less resilience than in the U.S. Without a revival in investment and trade, Canada risks falling further behind its neighbor and other major economies.

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