Canada's economy shrinks 1.6 per cent in Q2, largest decline since 2009

OTTAWA (Reuters) - Canada's economy shrank in the second quarter in its worst showing in seven years, hurt by a drop in exports and a disruption to oil production caused by wildfires in Alberta, but growth was still seen as likely to rebound later this year.

Although the second-quarter contraction was somewhat larger than the Bank of Canada had anticipated, the figures released on Wednesday were not expected to move the central bank off the sidelines at its meeting next week. Markets see a 92 percent probability that the bank will hold rates at 0.50 percent. [CA/POLL]

Upbeat growth in June also supported policymakers' expectations that the economy will pick up significantly in the third quarter, economists said.

"It's very much in line with the Bank of Canada's view that the economy stumbled badly through the spring," said Sal Guatieri, senior economist at BMO Capital Markets.