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September 1, 2021 | Canada’s Economy Contracts in Q2

Danielle Park

Portfolio Manager and President of Venable Park Investment Counsel ( Ms Park is a financial analyst, attorney, finance author and regular guest on North American media. She is also the author of the best-selling myth-busting book "Juggling Dynamite: An insider's wisdom on money management, markets and wealth that lasts," and a popular daily financial blog:

Canada’s economy unexpectedly shrank 0.3% in the second quarter for an annualized contraction of 1.1% versus the consensus forecast of a 2.5% gain.  Declines in home resale activities and exports were the largest negatives.  Homeownership transfer fees shrank 17.7%.  Constraints in the auto sector led to a 4% decrease in exports.

Business inventories, government expenditure, capital investment in machinery and equipment, new home construction and renovation were all higher on the quarter.


As we anticipated, the loonie is lower and Canada Treasury prices are higher on the news.  Slowing activity in Canada’s ridiculously priced housing sector is much overdue; it is also disinflationary.  If the downturn in activity translates to falling prices–and it should–the effects will be full-out deflationary.  This will be a big negative for households and an economy precariously concentrated on highly levered home prices.

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September 1st, 2021

Posted In: Juggling Dynamite

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