Upcoming Q2 GDP Figures: France & Canada

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Like Germany, we expect French final Q2 GDP numbers to reaffirm the preliminary ones. And they’ll probably have a minimal impact on the market.

But, also like Germany, there is an increased chance this time around that we will have a significant revision of the figures. The disruptions caused by COVID, plus the magnitude of the change, can make the initial estimation less reliable.

The consensus of expectations for French GDP is to come in the same as the prelim at -13.8%. On an annualized basis, that would be a contraction of -19.0%, also a repeat of the preliminary number.

The Market Reaction

If the market were to move as a consequence of the GDP figures, it most likely will be because of an unexpectedly large revision in the quarterly figure.

Investors already knew that the economic situation was bad; a little worse or a little better isn’t going to change the situation.

However, if there are over a couple of percentage points of revision, it could have enough of an impact to reevaluate growth projections. So, a result outside of a range between -12% to -16% would likely shake up the market a bit.

While France has recorded a smaller impact from COVID than some of its neighbors, authorities expect the recovery to take significantly longer.

On Monday French FinMin Le Maire reiterated that he sees the country’s GDP at -11% this year. This implies that there’s hardly any growth for the rest of the year. In that line, yesterday’s consumer confidence still showed contraction, well below pre-pandemic levels.

Although French consumers showed more optimism about future labor projections, their intention to save is the highest in years, suggesting less disposable income will be used to prop up the economy.

Canada’s Well on the Rebound

The COVID pandemic caused two months of economic contraction in Canada, which has already been followed by one month of recovery.

The expectation is that trend will have continued last month, even though there was a slight uptick in recorded COVID cases. However, Canada managed to avoid the major “second wave” that other countries have seen.

The coronavirus caused a total of 18.3% contraction in Canada’s economy. Since then, it has recovered 3.7% of the loss. The consensus of expectations is that Canada’s growth pace has leveled off a bit at a monthly growth of 4.0% compared to the 4.5% growth last month.

The Reaction

On an annualized basis, the economy is expected to fall further behind the comparable period last year. Part of this is due to seasonal effects, as the summer is when Canada’s GDP grows the fastest, anyway.

Consensus projections are for annualized GDP to come in at -14.3% compared to -13.8% in the prior month.

In the meantime, the BOC continues to stress monetary stability, unlike other central banks focusing on growth. The latest official was Schembri on Tuesday who talked about the “critical importance” of maintaining a “credible inflation target”



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