Conservatives in Canada make it clear to Trudeau about the slowdown in the economy before voting

OTTAWA, Aug 31 (Reuters) – Conservatives in Canada pounded Liberal Prime Minister Justin Trudeau on Tuesday after data showed the country’s economy shrank unexpectedly in the second quarter and again in July, placing the economy at the center of the debate three weeks before the national. choice.

According to an OECD report, Canada is the only country in the Group of Seven to see a slowdown in the second quarter.

“Canada’s economy is getting worse, not better,” said Conservative leader Erin O’Toole from her Ottawa headquarters. “Under Justin Trudeau we are heading for the path of recession and not for recovery.”

Canada’s economy shrank 1.1% in the second quarter on an annualized basis, and analysts ’expectations of a 2.5% gain were lost, according to Statistics Canada data. A preliminary estimate for July showed a contraction of 0.4%, while June GDP rose 0.7%, in line with expectations.

With the July downturn, economic activity remains about 2% below pre-pandemic levels, Statscan said.

“It’s a jaw drop,” said Doug Porter, chief economist at BMO Capital Markets, adding, “It’s probably going to be an awkward question for the government today, but I don’t think GDP numbers have a big impact on elections. “

Trudeau’s Liberals are currently tied with the Conservatives by 33% ahead of the Sept. 20 federal election, according to a new Nanos Research poll. Left-wing New Democrats have 19%.

Polls have shown that the economy is one of the main concerns of Canadians involved in voting.

Statscan said the fall in the second quarter was primarily driven by declining home sales and exports. Investment in housing increased during the pandemic, which helped boost the economic rebound from the crisis, but the market has cooled since its March high.

The likely contraction in July, which comes even as most provinces eased restrictions on COVID-19, was driven by declines in manufacturing, construction and retail, Statscan said. The outlook has been further clouded by the rise in new COVID-19 infections, especially among unvaccinated people.

Economists said the loss of GDP could affect the timing of the tightening of Bank of Canada policy, although hot inflation and a strong August could also affect the outlook.

The central bank said last month that it expected Canada’s economy to gain 2.0% in the second quarter, with “strong” growth in the third quarter as more services reopened. It will publish new forecasts in October.

“It’s weaker than their expectations,” said Jimmy Jean, chief economist at the Desjardins group. “At the same time, we also need to recognize that there will be a major rebound in the third quarter. So we don’t lose all hope.”

The Canadian dollar was trading 0.2% lower, at 1.2620, to the green dollar, or 79.24 US cents.

Additional reports from Fergal Smith in Toronto and Shariq Khan; Edited by Jonathan Oatis, Kevin Liffey and Mark Porter

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