Economic pieces ‘fall in place’ for Canada
GDP grows by 0.5 per cent, led by a rebound in the energy sector
OTTAWA It’s still early days, but Canada’s economy appears to be back on a growth track as the energy sector continues to recoup losses from last spring’s wildfires in Alberta.
Despite a string of disappointing domestic data — from weak exports to inconsistent employment growth — the economy entered the third quarter at a surprisingly healthy pace.
“Basically, all the pieces are starting to fall in place to get Canada on a somewhat stronger growth track in the year ahead,” said Sal Guatieri, senior economist at BMO Capital Markets. “It does suggest that Canada’s economy is moving forward.”
Gross domestic product — the broadest measure of economic performance — grew by 0.5 per cent in July, Statistics Canada reported Friday. The gains were led by a 3.9 per cent increase in the mining, quarrying and oil and gas extraction sector, the federal data agency said.
“Production returned to normal levels following maintenance shutdowns in April and the Fort McMurray wildfire and evacuation in May,” it said.
Other sectors advancing were finance and insurance, transportation and warehousing, and accommodation and food services. Manufacturing, agriculture and forestry and utilities also increased, while activity in the construction industry declined.
“The federal stimulus infrastructure and enhanced childcare benefits program could add a good 0.5 per cent to GDP growth this year and again next year,” said BMO’s Guatieri.
“As long as the U.S. economy comes back a bit and as long as the Canadian dollar remains cheap and interest rates stay low — and, of course, if oil prices continue to grind higher . . . (those are the) meaningful parts of the growth story.”
The July data came after a 0.6 per cent increase in June — the first time in a year that GDP advanced over two straight months.
While forecasters had under-estimated July’s growth — expecting just a 0.3 per cent clawback from the second-quarter contraction — the news is bound to please the federal government as well as the Bank of Canada, which has kept interest rates on hold for more than a year as policy-makers wait for an eventual pickup in the economy.
“From the Bank of Canada’s perspective, July’s healthy growth figures are not likely to move the needle,” said Brian DePratto at TD Economics. Even as the energy sector regains momentum after disruptions by the wildfires — and gains in oil prices and the Canadian dollar following an agreement by OPEC to cut production — “the bank remains focused on the rotation of economic growth, which largely stalled in the first half of the year.”
The central bank’s next rate decision is scheduled for Oct. 19.
From the Bank of Canada’s perspective, July’s healthy growth figures are not likely to move the needle.