Canada GDP Fades After Rising 0.2% in July — Update

By Robb M. Stewart

OTTAWA--A retail-driven recovery for Canada's economy in July was likely short-lived as weakness in manufacturing and transportation look to have weighed on output last month.

Preliminary data suggest industry-level gross domestic product was essentially unchanged in August, Statistics Canada said Friday.

The follows a 0.2% expansion in July GDP from the month before to 2.234 trillion Canadian dollars, the equivalent of US$1.733 trillion. Compared with a year earlier, GDP increased 1.5%.

Output by industry has been lackluster since May and the advance reading for August likely leaves growth for the quarter tracking weaker than the 2.8% annualized advance forecast by the Bank of Canada. And following rapid population growth in recent years, another soft month will reinforce economist expectations Canadian GDP on a per-capita basis will contract for an eighth quarter in the last nine.

Growth in July was stronger than the 0.1% monthly advance economists had expected and Statistics Canada's early projection for a second straight month of flat GDP. The retreat in output in August came as a rolling shutdown of the country's two major freight-rail networks during a labor dispute curtailed the movement of goods across the country and cross-border trade.

Central bank officials, who are set to update economic projections with the next policy meeting in late October, are keen for growth to pick up and absorb some of the excess supply in the economy so that inflation doesn't fall too much and settles close to the 2% target that was reached in August.

Bank of Canada Gov. Tiff Macklem in a speech reiterated the pace and timing of further cuts in interest rates would hang on incoming data, which have pointed to a softer-than-anticipated economy. The central bank has cut its policy rate at each of its last three meetings, and economists have increasingly debated whether bigger cuts than the quarter percentage point moves to date will be needed to help boost demand in the economy.

The pickup in July was driven by the strongest rise in retail trade since January 2023 and ongoing growth in the public sector, which has expanded for seven consecutive months. The finance and insurance industry also saw a second straight month of growth, while utilities rose for a third month running, thanks in part to a jump in demand for electricity with warmer-than-usual weather in parts of the country's west.

Still, construction in July fell for a third time in four months. And overall growth was held back by wildfires, including blazes that spread through Jasper National Park and the Rocky Mountains, and affected accommodation services, some iron ore mining and forced the suspension of rail freight to and from key ports in Western Canada.

Across the economy, goods-producing industries edged up 0.1% for July and services-producing industries grew 0.2%.

Statistics Canada's advance estimate for August indicates increases in oil and gas extraction were offset by declines in manufacturing and transportation and warehousing.

Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

September 27, 2024 08:53 ET (12:53 GMT)

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