Canadian economy contracts 11.5 percent while household disposable income rises 10.8 percent from April to June

Statistics Canada has offered a detailed picture of the extent of economic carnage in the second quarter of 2020.

From April to June, Canada's gross domestic product declined by 11.5 percent. That compared to a 9.1-percent drop in the United States, a 20.4 percent decline in the United Kingdom, and a 13.8 percent shrinkage in France over the same period. 

"The second quarter decline—the steepest since quarterly data were first recorded in 1961—reflected sharp decreases in household spending, business investment, and international trade owing to widespread shutdowns of non-essential businesses, border closures, and restrictions on travel and tourism in response to the COVID-19 pandemic," Statistics Canada stated.

Household spending in Canada crashed by 13.1 percent. Statistics Canada attributed that to "substantial job losses, limited opportunities to spend because of closures of stores and restaurants and restrictions on travel and tourism".

Some of the largest declines came in purchases of transportation services (-79.2 percent), food, beverage, and accommodation services (-45.6 percent), clothing materials (-38.3 percent) and new passenger cars (-37.8 percent).

Employees' compensation declined by 8.9 percent. However, there was a 10.8 percent rise in household disposable income, due to government transfers to offset the impact of COVID-19 measures to slow the economy.

"This increase, coupled with a 13.7% decline in household spending (in nominal terms), pushed the household saving rate to 28.2% from 7.6% in the previous quarter," Statistics Canada stated. "The household savings rate is aggregated across all income brackets; in general, savings rates are higher for higher income brackets."

Exports fell by 18.4 percent in the second quarter, whereas imports dropped by 22.6 percent. And there was a record 16.2 percent decrease in investment.

Three million Canadian jobs were lost in March and April, but since then, the employment numbers have improved as provinces have begun reopening their economies.

Nearly one million jobs were added in June, following a gain of 290,000 jobs in May.

"With these two consecutive increases, employment in June was 1.8 million (-9.2%) lower than in February," Statistics Canada reported last month.