Canada's economic growth slows in Q2

The Canadian economy grew at an annual rate of two per cent in the second quarter, down from 5.8 per cent in the first quarter.

The Canadian economy grew at an annual rate of two per cent in the second quarter, down from 5.8 per cent in the first quarter.

The mining sector, including this oilsands mine near Fort McMurray, Alta., was a key driver of Canada's economy in the second quarter. ((Jeff McIntosh/Canadian Press))

Statistics Canada reported Tuesday that Canada's gross domestic product expanded by 0.5 per cent in the March to June period, after increasing by 1.4 per cent in the first three months of the year.

It was the fourth consecutive quarterly expansion after the recession.

"What you see is what we’ll get for growth through the second half, with the economy expected to grow at a modest two per cent average pace in the next two quarters," BMO economist Doug Porter said in reaction to the news.

Finance Minister Jim Flaherty put a positive spin on the modest showing, noting that the economy has created 400,000 new jobs since the recession ended in 2009.

"Today’s GDP numbers show that Canada’s economy is on the right track, " he said. "[But] the global economic recovery remains fragile. That’s why creating jobs and protecting Canada’s economic advantage remains our government’s top priority."

Mining, notably oil and gas extraction, was a major driver of the economic expansion.

Export and import volumes both rose, with growth in imports outpacing growth in exports for a second consecutive quarter.

The output of the goods-producing industries rose 1.9 per cent, while that of the service industries edged up 0.1 per cent. It was the third quarter in a row that goods outpaced services.

Expansion predicted to continue

In June alone, the economy expanded by 0.2 per cent.

"We still expect growth to ease to less than two per cent in the current quarter, as housing drags from GDP and capital spending tails off after the Q2 bounce," Porter said.

TD economist Diana Petramala expects the modest economic expansion to continue for the next little while, and for the Bank of Canada to pause after raising its benchmark interest rate to one per cent before the end of the year.

"Next quarter we expect to see a slight drag from the introduction of the harmonized sales tax in B.C. and Ontario, and a partial unwind of fiscal stimulus," she noted.