The Canadian dollar weakened briefly after Canadian GDP data were released today which show the economy contracted in the second quarter, for the first time since the 2008 recession, blamed on temporary factors like natural disasters, meaning the Japan earthquake and interrupted energy sources and automobile production as a result of that.
Annualized GDP fell 0.4 percent in Q2 lower than the forecast 0.1 percent gain and much lower than the first quarter gain of 3.6 percent.
Slowing economies of the U.S. and Europe, Canada’s main trading partners, also affected the growth numbers. The report fuels speculation that the Bank of Canada may keep interest rates at 1 percent when it meets to discuss policy on September 7.
The Canadian dollar weakened against the U.S. dollar after the news but soon recovered. USDCAD jumped to 0.9772 from 0.9760 within a minute but soon eased and is currently trading at 0.9750 at 13:30 GMT.
A breakdown of the GDP data show that trade was the main factor weighing down the economy in the second quarter as imports of goods and services rose 2.4 percent, led by a 6.6 percent gain in machinery and equipment. Exports, which made up a third of Canada’s economy in 2010, fell 2.1 percent, the most in two years. Automobile production fell 6 percent, disrupted by Japan’s earthquake and tsunami, while wildfires in Alberta and maintenance shutdowns curbed oil and gas extraction by 3.6 percent.