Quebec: Real GDP Falls 1.9% in Q2 2023
- Real GDP took a sharp dive in the second quarter, falling an annualized 1.9%. This comes on the heels of an observed slowdown, with economic growth decelerating from 1.9% in Q4 2022 to 1.4% in Q1 2023.
- Household consumption expenditure was down for the first time since the pandemic started. On an annualized basis, it declined 2.0% overall, with a 2.8% decline in services and 1.1% in goods, including 7.5% for durable goods.
- Residential investment continued its slide for a fifth consecutive quarter, this time losing 21.2% on an annualized basis. A rebound in the resale market wasn't enough to offset a drop in new construction and renovation spending.
- Business investment fell 3.2%, declining an annualized 1.8% for non-residential structures and 0.9% for machinery and equipment.
- Inventory accumulation stalled, which was another drag on the economy.
- A rebound in exports, however, helped reduce the trade deficit, which stands at -$23.0 billion in 2012 dollars.
- Monthly GDP by industry picked up 0.1% in June, despite the forest fires in some regions of the province.
The size of the second-quarter decline in real GDP comes as no surprise—several economic indicators had been suggesting as much. The rising interest rates that have been weighing on the housing sector for the past several quarters are starting to affect durable goods purchases, which are often made on credit. Businesses are also exhibiting signs of caution in their investments as many of them face financial difficulties. We expect conditions to remain difficult for both households and businesses over the coming quarters. While it's still too early to call, this may be the start of an economic contraction lasting into early 2024, according to our forecast scenario.
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