Economy rebounded in July
OTTAWA—Canada’s economy had one of the best months in years in July—rebounding strongly from a June swoon and returning the economy back to the path of moderate growth.
Statistics Canada reported today that gross domestic product in July advanced an encouraging 0.6 percent during the month, wiping out half-point setback in June that mostly was attributed to a two-week construction strike in Quebec and flooding in Alberta.
But analysts noted the acceleration is unlikely to match the Bank of Canada’s expectation of a 3.8 percent surge for the third quarter, which would be more than double the 1.7 percent pace in the second quarter.
“This offsets the sour taste from the prior months, but in many ways we’ve seen this coming,” said Doug Porter, chief economist with the Bank of Montreal.
“The best way to look at this is to average out the two months,” he noted.
“So when you look through all the noise [of temporary factors], we’re still dealing with an economy that is growing at about 1.5 percent to two percent annualized.”
Jimmy Jean of Desjardins Capital Markets concurred, saying the Bank of Canada is unlikely to alter course as a result of the GDP figure.
“We continue to believe that the first hike [in interest rates] will occur no earlier than the spring of 2015,” he predicted.
The Canadian dollar gained moderately this morning by 0.14 cents to 97.20 cents (U.S.) on the news.
The bigger picture for the Canadian economy going forward, say analysts, is the difficulties brewing in the United States, where the country faces two self-imposed deadlines over a looming government shutdown and the extension of debt limit authority to continue paying its creditors.
Porter said the shutdown and debt issue will have “real consequences” on the U.S. economy, which, in turn, could sideswipe Canada this fall.