OTTAWA—Canada's economy shrank in the second quarter, the country's first contraction in two years, underscoring the sudden economic headwinds that are buffeting even some of the world's most resilient economies.
A few months ago, Canada was performing better than most of its Group of Seven peers—its strong banking sector and plentiful natural resources bolstering its broader economy and its currency. But Canada is heavily dependent on international trade, and the global slowdown that has buffeted the U.S. and Europe, has hit hard here, too.
Gross domestic product declined 0.1% from the first quarter, for an annualized contraction of 0.4%, Canada's statistics agency said on Wednesday. Recent economic data—including weak factory sales and trade figures released earlier in August—had some economists forecasting a modest retraction. But others had held out hope for slow or at least flat growth—similar to second-quarter performances posted in the U.S. and the euro zone.
Among the G-7, only Japan, and now Canada, have posted negative growth for the quarter. That is after several quarters where Canada largely outperformed its developed peers.
If you look at the money supply, it's no surprise that the Canadian GDP is declining. The Canadian M1 has been declining since beginning of 2010.
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