Canadian GDP fell 0.1% in July, estimated increase for August – National
Consumers appear to have helped the Canadian economy through a stumble in July, as Statistics Canada reported on Friday that real gross domestic product fell 0.1 percent in the month before rebounding in August.
July’s figure was better than the agency’s initial estimate of a 0.4% contraction as warmer weather, easing public health restrictions and falling COVID-19 cases filled the patios and watched the Canadians travel.
The accommodation and food services industry, which has been hit hard by public health measures restricting in-person and travel services, rose 12.5% in July, marking the second consecutive month of growth in two digits.
Air travel rose 67.7 percent during the July travel season after fully vaccinated visitors were no longer required to self-quarantine as of July 5.
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The increase in spending in the service sector appears to have continued in August as well as September based on some early indicators for the month just ended, said Sri Thanabalasingam, senior economist at TD.
Yet each sector is still well below what it was just before the pandemic hit. The accommodation and food services industry in July was 21.3% below February 2020 levels, while air travel was almost 83% below pre-pandemic levels.
“As it begins to close to its pre-pandemic level, that’s when we can start to see slowed growth,” Thanabalasingam said in an interview. “And then moving through the fall and winter, we’re probably going to see some risk, especially in the form of the fourth wave and cooler weather, which will impact spending in those areas. . “
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Statistics Canada said total economic activity in July was about 2% lower than pre-pandemic levels recorded in February 2020, a gap that closed to 1% in August based on the estimate. the agency’s initial increase of 0.7% of GDP for the month. The August GDP figure will be finalized at the end of October.
RBC economist Claire Fan wrote that further increases in GDP will be more difficult to achieve, especially in the next year or so, as worries about inflation replace worries about growth and central banks, like the Bank of Canada, are considering raising their interest rates as low as possible.
In Canada, the move would come against the backdrop of new federal spending promised by Trudeau’s Liberals during the election campaign.
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A post-election analysis by Rebekah Young, Scotiabank’s provincial director of finance and economics, estimated that the $ 13 billion Liberals pledged in new spending this fiscal year and next could add about two tenths of a percentage point production, but could also force the central bank to raise rates earlier than expected.
She wrote that a half-percentage point increase in the target overnight rate would temporarily dampen economic activity by around 0.2 percentage point of GDP, offsetting the fiscal boost.
The central bank has scheduled a rate announcement later this month. BMO Chief Economist Douglas Porter said economic indicators released on Friday helped strengthen the view that the Bank of Canada would further cut its bond buying program designed to encourage interest rates on mortgages and business loans to go down and stay low.
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While the majority of sectors Statistics Canada tracked grew in July, declines in sectors such as agriculture, utilities and manufacturing more than offset the gains.
Heat and drought in the west reduced agricultural production, except cannabis, to its lowest level since November 2007, while cooler weather in central Canada helped reduce spending on utilities public by 4.9%. At the same time, persistent supply chain constraints pushed the manufacturing sector down 1.1% in July.
The construction sector fell 0.9 percent, which Statistics Canada said was due to a third consecutive month of decline in residential construction activity after reaching a record low in April.
“That said, housing markets appear to be picking up again, and these sectors could pick up speed again, especially if consumers end up spending more time at home this winter,” said Royce Mendes, senior economist at CIBC.
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