The Canadian economy grew for the second month in a row in July after shrinking in the first five months of the year, according to Statistics Canada.
Gross domestic product increased 0.3% in the month, beating analysts’ call for growth of around 0.2%. This comes a month after a downwardly revised figure of 0.4% growth in June.
“After a growth stumble in the first part of the year, the Canadian economy appears to be picking itself back up,” CIBC World Markets economist Nick Exarhos said in a note to investors.
“The industry breakdown didn’t contain too many surprises, although the mining and quarrying gain of almost 3% was stronger than we would have expected given the monthly trend in crude exports.”
Mining, quarrying and oil and gas extraction was the only sector to see growth of more than 1% in the month, however. Other sectors that strengthened were manufacturing, up 0.6%, and real estate and rental and leasing and transportation and warehousing, both up 0.8%. This was offset by a 1.3% dip in agriculture, forestry, fishing and hunting and a 1.9% drop in utilities.
The drop in the price of crude was the reason GDP contracted in the first half of the year, Exarhos said. The energy sector, which grew 2% in July, will drive third quarter growth in Canada, he said.
Paul Ferley, assistant chief economist for RBC economics, said third-quarter growth of 2.5% is expected.
“This rebound from the weak growth during the fist half of 2015 reflected in large part strengthening exports and consumer spending starting to offset continued declines in energy investment,” Ferley said.
“The Bank of Canada’s most recent forecast, released in July, assumed a return to positive growth in the third quarter of 1.5% to be led by strengthening exports.”
Ferley said RBC expects Canada’s central bank to hold the overnight rate at 0.5% into next year.
“We expect the next move by the Bank of Canada will be to withdraw some of the current highly stimulative monetary conditions. We look for the overnight rate to be hiked in the fourth quarter of 2016.”
