UPDATE 3-Canada's economy slows in 2nd quarter, shrinks in June

Fri Aug 30, 2013 12:01pm EDT
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* 2nd qtr GDP 1.7 pct, annualized, down from 1st qtr

* June GDP contracts by 0.5 pct

* Consumers drive growth; exports, business investment weak

* Economists expect stronger 3rd quarter, rates on hold

By Louise Egan

OTTAWA, Aug 30 (Reuters) - Canada's economy shifted into lower gear in the second quarter and contracted in June for the first time in six months, hurt by a Quebec construction strike and flooding in Alberta.

Gross domestic product grew by 1.7 percent on an annualized basis in the quarter, Statistics Canada said on Friday. The growth was largely powered by consumer spending while business investment, inventories and exports dragged on growth.

The expansion slowed from a 2.2 percent clip in the first quarter, revised down from the 2.5 percent rate initially reported. Canada underperformed the United States, where growth accelerated to a 2.5 percent annual rate in the second quarter.

The lackluster performance was widely anticipated, with forecasters in a Reuters poll expecting growth of 1.5 percent and the Bank of Canada last month estimating a gloomier 1 percent gain.   Continued...