Canada’s gross domestic product expanded by 0.1 per cent in July, besting expectations of an imminent decline, as growth in mining, agriculture and the oil and gas sector offset shrinkage in manufacturing.
Statistics Canada reported Thursday that economic output from the oilsands sector increased sharply, by 5.1 per cent during the month. That was a change in direction after two straight months of decline, which brought second-quarter growth to 4.2 per cent thus far.
The agriculture, forestry, fishing and hunting sector led growth with 3.2 per cent. Unlike the United States and Europe, both of which are facing drought conditions, Canada has had a good year for crop production said Scotiabank economist Derek Holt.
On the downside, the manufacturing sector shrank by 0.5 per cent, its third decline in four months. Canada’s export market with the United States has softened and global supply chain issues linger, said Holt. The latter are gradually easing, which could create a better picture for the sector in the second half of the quarter.
Wholesale trade shrank by 0.7 per cent, and the retail sector declined by 1.9 per cent. That’s the smallest output for retail since December.
“What happened this summer was a big rotation away from goods spending towards services spending,” Holt said. Activities like haircuts, travel or outings to the theatre, made popular with the lifting of pandemic restrictions, leave out retail.
While the economy eked out slight growth in July, the data agency’s early look at August’s numbers shows no growth.
“The economy fared better than anticipated this summer, but the showing still wasn’t much to write home about,” said economist Royce Mendes with Desjardins. “While the data did beat expectations today, the numbers didn’t move the needle enough to see a material market reaction.”
The performance of Canada’s economy throughout the fiscal year — 3.6 per cent growth in Q1 and 4.2 per cent thus far in Q2 — remains one of the best in the world, Holt said.
Mendes said he expects growth will stay under one per cent this year: half of the Bank of Canada’s two per cent prediction and a third of the growth seen in the first two quarters.
“We’re definitely slowing, and more of that is coming in a lagged response to higher interest rates and all the challenges of the world economy,” Holt said. “But relative to the rest of the world, for the year as a whole, Canada has been in a sweet spot.”