Real GDP grew by 1.8% at an annual rate in the second quarter, but nominal GDP grew by only 0.47% at an annual rate. The GDP deflator was negative in the second quarter. The following analysis focuses on some worrying nominal GDP dynamics:
The trend in nominal GDP continues downward, both on a short term and long term perspective:
Inventories were a major contributor to nominal (and real) GDP in the second quarter with the change in inventories running at 4.2 times the change in GDP, an historical high:
Whether this is related to the large drop in net exports (nominal basis) and the large increase in imports remains to be seen.
Residential construction continues to be an important component of nominal GDP (less so real GDP):
A bright spot has been business investment in equipment and machinery, although here we do not know how much of this is tied into a) the construction sector and b) is auto related and hence influenced by the large inventory dynamics in the US market.
The downturn in world export growth, continuing weakness in Europe, poor data from China and at best ambiguous growth data in the US does raise concerns for the Canadian economy.