Quebec’s economy shrank by 1.9% in the second quarter, a sharper decline than the Canadian average of -0.2%.
This sudden fall is not surprising because there were many signs of weakness before it, commented Desjardins economist Helen Begin. “Although it is still too early to tell, this could be the start of a period of economic contraction that, according to our scenario, is likely to last until early 2024,” he said. – She went ahead.
Quebec’s economy is doing well so far, with GDP growth of 1.9% in the last quarter of 2022 and a 1.4% advance in the first quarter of the current year.
Inflation and rising interest rates are starting to take a toll on household costs. Consumer spending fell for the first time since the start of the pandemic, stressed Darren King, economist at the National Bank. “The annual decline totaled 2%, or 2.8% for services and 1.1% for goods.
For durable goods, often bought on credit, the drop reached 7.5% in the second quarter.
Residential investment also declined, as did business investment. Exports rose 10.9% and imports fell 5.1% to limit the slowdown in Quebec’s economy in the second quarter.
The household savings rate rose to 8.2% in the second quarter from 6.8% in the first quarter. This cushion, as well as heavy debt below the Canadian average, puts Quebec in an enviable position, according to the National Bank, which anticipates not a recession, but “growth oscillating around the neutral point” in the coming months.