GDP plunges record 38.7% in second quarter, but economy may be on mend faster than expected
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Statistics Canada also released its preliminary numbers for July which suggest continued growth for the economy, this time in the way of a three-per cent increase, which was also not projected by economists.
What’s also affecting how they view the outlook for the Canadian economy is the savings rate, which spiked to an all-time high of 28.2 per cent as a result of the decline in household spending. Thanks to the Canada Emergency Response Benefit, disposable incomes also rose in the second quarter, a 10.8 per cent increase. Government assistance in the quarter totalled $56 billion, according to the Royal Bank of Canada, and more than offset the $23-billion decline in wages and salaries. Mendes said Canadians may be able to use the extra cash from the quarter to lessen the impact of expiring mortgage deferrals and a still-elevated unemployment rate.
The combination of the June and July numbers and the strong savings numbers, both Porter and Mendes believe, are so good that they’ll each have to revise their outlook for the year. Porter has already done so. His projections for the year now stand at a 5.5 per cent decline, up from his previous estimate of six per cent. Mendes originally had a 7.1 per cent GDP contraction pencilled in.
“It’s not a big change, but it’s the first upward revision this year by us on Canada, which is a big deal,” Porter wrote.
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