Economic Report by Benjamin Tal

Deputy Chief Economist, CIBC World Markets
Accidents can happen to any economy.
Temporary troubles in energy and autos hit
exports hard during the second quarter, which
was enough to push Canada’s Gross Domestic
Product (the size of our economy with inflation
factored in) into a decline—even though
demand was healthy at home. This made the
quarter look worse than it really was, and a
rebound is therefore likely in the third quarter. Indeed, June’s monthly
data showed a decent 0.2% gain as a signpost of an upward trend.
Aside from January’s strong growth, Canada’s GDP has been
essentially flat for five months. Flat economies don’t inevitably signal
a recession—both Canada and the US have gone through many

The Bank of Canada is no longer as
worried about inflation

Until the global economy is on a more solid track, the Bank of
Canada is being very patient in raising rates. It hinted at rate hikes
for July and September, neither of which materialized. Now the Bank
is no longer as worried that low interest rates will trigger inflation, and
therefore the need to withdraw monetary stimulus has diminished.