The Canadian economy expanded, albeit modestly, for the third consecutive month in August, Statistics Canada announced October 30, almost completely reversing the declines in the first five months of the year.
Gross domestic product increased 0.1% in the month, meeting analysts’ expectations, after growing 0.4% in June and 0.3% in August.
“The three-month string of gains almost reverses the five-month string of declines that preceded it, leaving output down a micro 0.04% since the start of the year,” Douglas Porter, chief economist at BMO Financial Group, said in a note to investors.
“After a brief burst of growth around mid-year, which followed the first-half sag, the Canadian economy is settling back into slow-growth slog.”
Overall, goods-producing industries were up 0.3% in the month. The biggest gains were in manufacturing and mining and oil and gas output, both up 0.4%.
Services-producing industries had growth of 0.1% in August, led by gains in retail trade and transportation and warehousing, both up 0.6%.
Most service-producing sectors saw decreases in the month, however, with finance down 0.2%, wholesale trade down 0.5% and arts and entertainment down 0.9%.
Porter said the drop in arts and entertainment is surprising.
“[The arts and entertainment] category has been pushed around this year by first the Women’s World Cup of Soccer, then the Pan-Am games, and will get another small boost in the next few reports from the—sadly just-ended—Blue Jay run,” Porter said.
Year-over-year, GDP has increased 0.9%, despite a 12-month drop of 3.5% in construction, which Porter said is related to the slowdown in the energy sector as well as an excess in the supply of office buildings. Wholesale trade (down 1.1%) and information and cultural industries (down 0.9%) also saw declines. Finance and insurance (up 5.5%), real estate (up 3.1%) and retail trade (up 2.0%) helped offset these losses.
The Bank of Canada is forecasting third quarter growth of 2.5%, but Porter said this may be a bit optimistic.
“It now looks like September GDP may have taken a temporary step back due to an outage in a major oilsands project as well as tiny downward revisions to prior months,” he said. “As a result, we are shaving our Q3 estimate to 2.3% growth—although that’s still a nice bounce from the small declines seen in the first two quarters of the year.”
Porter points out the expected Canadian GDP growth is still a point above the United States’ growth of 1.5% for Q3.
The Canadian dollar surged on the morning’s news, jumping more than half a cent and reaching 76.46 cents U.S. as of press time.
