Canada’s Economy Grows for Third Straight Month in AugustGreg Quinn
Canada’s economy grew for a third month in August, cementing a rebound from an oil shock that had pulled the nation toward recession in the first half of this year.
Gross domestic product increased 0.1 percent to an annualized C$1.66 trillion ($1.26 trillion), Statistics Canada said Friday in Ottawa, following gains of 0.4 percent and 0.3 percent in June and July.
The August increase was led by manufacturing, which grew
0.4 percent to C$175 billion on production of chemicals and paper. Oil and gas extraction rose by 0.3 percent and retailing increased 0.6 percent led by food, automobiles and furniture.
The third quarter may be a high point in a recovery from falling commodity prices, which the Bank of Canada said last week will take until around the middle of 2017 to complete. Governor Stephen Poloz cut his growth forecasts for the next two years on Oct. 21 as and kept his policy interest rate at 0.5 percent saying weak investment by energy companies will restrain growth.
“The Canadian economy is settling back into slow-growth slog,” said Doug Porter, chief economist at BMO Capital Markets in Toronto. “The August number is closer to the underlying trend, we saw the so-called burst in the early months of the summer and that was it.”
The third quarter will probably end with output contracting in September because of a production shutdown in Alberta’s oil sands, said Porter, who lowered his quarterly growth forecast to
2.3 percent from 2.5 percent.
Canada’s economy shrank in the first two quarters of this year, a time where continued job gains defied the normal textbook definition of a recession.
Gains outside the energy industry will be enough to keep Poloz from cutting interest rates again, said Paul Ferley, assistant chief economist at Royal Bank of Canada in Toronto.
“We don’t expect a hike in the overnight rate until late next year when more substantial progress has been made absorbing excess slack in the economy,” Ferley said.
Gross domestic product has grown 0.9 percent in August from the same month in 2014, Statistics Canada said.
The August expansion matched the median forecast in a Bloomberg economist survey. The monthly growth rate was slowed by declines of 0.5 percent in wholesaling and 0.2 percent in the finance and insurance category.
Canada’s dollar rose 0.2 percent to C$1.3147 per U.S. dollar at 10:17 a.m. Toronto time.