Quebec’s economy contracted by 1.9% in the second quarter, a sharper decline than the Canadian average of -0.2%.
Helen Begin, an economist at Desjardins, commented that this sudden decline is not surprising because it was preceded by several signs of weakness. “Although it is still too early to say, this could be the beginning of a period of economic contraction that is likely to last until the beginning of 2024, according to our scenario,” she added.
Quebec’s economy has performed well so far, with GDP growth reaching 1.9% in the fourth quarter of 2022 and a 1.4% advance in the first quarter of this year.
Inflation and higher interest rates are starting to impact household spending. Darren King, an economist at the National Bank, confirmed that consumer spending decreased for the first time since the beginning of the pandemic. “The annual decline amounts to 2% for total, or a 2.8% decline for services and 1.1% for goods.
For durable goods, which are often purchased on credit, the decline reached 7.5% in the second quarter.
Residential investment declined, as did commercial investment. A 10.9% jump in exports and a 5.1% drop in imports limited the decline in Quebec’s economy in the second quarter.
The household savings rate increased from 6.8% in the first quarter to 8.2% in the second quarter. This cushion, combined with less debt-heavy debt than the Canadian average, puts Quebec in an enviable position, according to the National Bank, which does not expect a recession, but “growth that will hover around the neutral point” over the coming months.
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