Canada’s economy expanded in July as the post-wildfire rebound in oil and gas output assisted in stimulating economic growth. The economy grew 0.5 percent in July following a 0.6 percent expansion in the prior month. The two months have seen the best consecutive growth performance since June and July of 2011, noted TD Economics in a research note.
Oil and gas, which mainly contributed to the monthly economic growth of the nation, rose 8.1 percent sequentially in July. After effects of the wildfire were also seen in manufacturing that grew 0.4 percent. It gained from another solid performance in the petroleum and coal product subsector that grew 8 percent in the month. In all, the economy’s goods-producing side expanded 1 percent, with the exception of construction, which shrank 0.8 percent in July.
Meanwhile, service side of the Canadian economy also grew soundly. It expanded 0.3 percent in the month. Almost all subsectors grew and sound growth was witnessed in transportation, accommodation and food services, and finance and insurance. Only public administration and other services contracted in the month.
The Canadian economy witnessed a continued recovery in July after the wildfire-led disruptions in May. The July report indicates towards strong economic momentum for the third quarter, said TD Economics.
“We are currently tracking economic growth of roughly 3.0 percent for the quarter”, added TD Economics.
The anticipated rebound in third quarter expansion is mostly a one-off story, aided by both the post-wildfire rebound in oil and gas production and related activities. However, the underlying details are not in line with a sustained growth rate of 3 percent.
“A more modest pace of growth is forecast moving forward, in line with an economy that has made limited progress to date in shifting its growth drivers”, stated TD Economics.
Looking from the Bank of Canada’s view, the July prints are unlikely to move the needle, added TD Economics. The central bank continues to concentrate on the rotation of economic growth that mainly stalled in the first half of 2016. Therefore, the BoC is expected to focus more on the development of trade and to keep the slightly dovish bias.