GDP, consumer spending grew in 2nd quarter

Canada's economy grewat an annualized rate of1.7 per cent in the second quarter of this year, and consumer spending was up almost one per cent in that period, according to the latest Statistics Canada figures released Friday.

Real GDPexpanded by0.4 per cent,or 1.7 per cent when expressed as an annualized rate, in the second quarter of 2013.

That growth was better than the 1.6 per cent analysts and the 1.0 per cent the Bank of Canadawerepredictingbut was less than the 2.2 per cent annualized rate of growth seen in the first quarter. U.S. GDP growth,by comparison,was up 2.5 per cent in the second quarter.

Growth in consumer spending, whichwas atitsfastest pace since thelast quarter of2010, was driven by spending on durable goods, which grew by 3.2 per cent.

Vehicles accounted for a good portion of that growth, with vehicle purchases increasing by 4.7 per cent.

"This was the fourth consecutive quarterly increase in vehicle purchases, and the strongest advance since the first quarter of2012," Statistics Canada said.

Alberta floods boost insurance spending

Spending on services also saw an uptick, growing by 0.7 per cent. In this category,insurance and financial services accounted for much of the growth, increasing by1.4 per cent, largely on account of higher claims resulting from the flooding in southern Alberta in June.

Household spending grew at a faster pace than household income in the second quarter, and both the savings rate and the debt service ratio of householdswere down slightly from the previousquarter.

The household saving rate was5.1 per cent, compared to 5.3 per centin the first quarter.

The debt service ratio was7.15 per cent, versus 7.26 per centin the first quarter. The average rate was7.3 per cent in2012.

June results show 0.5% contraction

Statistics Canada also released Juneresults Friday that showed that real GDP contracted slightly that month, decreasing by 0.5 per cent. The 1.9per centdecline in construction accounted for much of that, caused in part by a labour dispute in Quebec. Non-residential building construction was down 7.3 per cent in June.

Wholesale and retail trade were also down in June by 2.4 per cent and 1.4 per cent, respectively. A decline in agricultural supplies and building materials and suppliesaccounted for much of the drop in the wholesale sector. Slower sales in food and beverage stores and motor vehicle and partswere responsible for the decline inretail trade, which had seen three months of growth prior to June.

The Royal Bank of Canada said in its analysis of the numbers that it expects the economy to rebound fromthe effects of the Alberta floods and the Quebec construction strike by the next quarter.

"We are assuming more than a full reversal of the June weakness to occur through the third quarter,"RBC Economic Researchsaid in an emailed statement. "This is expected to send Q3 GDP growth back up to 3.4 per cent."

Statistics Canada also noted that while Canada's exports were up by 0.2 per cent overall in the second quarter, exports were notably lower in energy products (-6.3 per cent) and farm, fishing and intermediate food products (-6.5 per cent).

Imports saw slightly slower growth than in the first quarter, increasing by 0.4 per cent versus 0.6 per cent in the previous quarter.