Canada’s econ­omy pauses in July, Stat Can says, eas­ing rate hike ex­pec­ta­tions

Medicine Hat News - - NATION -

OT­TAWA Canada’s eight-month march of monthly growth in the econ­omy came to an end in July, ac­cord­ing to Sta­tis­tics Canada, a de­vel­op­ment that could head off more rate hikes this year.

Gross do­mes­tic prod­uct was es­sen­tially un­changed, at zero per cent growth in July com­pared with June, Sta­tis­tics Canada said Fri­day.

Econ­o­mists said the lack of growth in July sup­ports Bank of Canada gover­nor Stephen Poloz’s cau­tious ap­proach to in­creas­ing in­ter­est rates in a speech Wed­nes­day.

The cen­tral bank raised rates twice over the sum­mer fol­low­ing the econ­omy’s sur­pris­ingly pow­er­ful start to the year.

“The (un­usu­ally) long streak of in­creases over the prior year means that GDP was still up a solid 3.8 per cent year-over-year in July, re­flect­ing broadly-based gains across goods and ser­vices sec­tors,” said RBC se­nior econ­o­mist Nathan Janzen in a re­port.

“More broadly, the slow­ing in GDP growth in July is con­sis­tent with our — and the Bank of Canada’s — view that the re­cent out­sized pace of growth over the last year won’t be sus­tained go­ing for­ward.”

He said RBC is stick­ing with its pre­dic­tion of GDP growth of 2.5 per cent in the third quar­ter which ends Satur­day, adding that pace could still jus­tify fur­ther grad­ual rate hikes from the cen­tral bank.

“We sus­pect that the slower start to Q3 gives us the flavour of things to come, with our fore­cast for the back half of the year track­ing half the pace seen at the start of 2017,” said CIBC econ­o­mist Nick Exarhos in a note.

“That’s an­other rea­son why we see the Bank of Canada us­ing a more gen­tle hand with tight­en­ing from here.”

Most of the July weak­ness was in goods pro­duc­tion which had a con­trac­tion of 0.5 per cent, while the oil and gas sub­sec­tor shrank 1.8 per cent, with de­clines in both con­ven­tional and non-con­ven­tional pro­duc­tion.

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