High levels of household debt remain the main risk to Canadian financial stability, but with tighter mortgage rules in place, the quality of the stock of household debt should continue to improve. However, consumption was surprisingly soft in the quarter, particularly given the increase in labour income. And the national accounts data suggest that some of the economy’s strength will be temporary.
Exports were very strong, but much of that came from a sharp rebound in shipments of crude oil and transportation equipment. Imports were surprisingly weak, and companies are still carrying high levels of inventories. Business investment contracted sharply after a strong first quarter, likely reflecting, in part, the impact of the escalating trade war.