July GDP rose a strong 0.6% in the month that more than reversed the 0.5% drop in June. Statistics Canada, which released the figures this morning, also said the July increase was slightly stronger than the 0.5% gain expected going into the report.
Expectations of a solid increase in July were premised on the assumption of a reversal of a number of special factors such as the construction strike in Quebec and the flooding in Alberta being reversed. The former was clearly evident with construction output rising 1.9% after a 2.1% drop in June.
As easing in the flooding may have contributed to the mining, oil and gas extraction rising 1.4% in July after flat output in June. The strike and the flooding may have partially accounted for manufacturing activity dropping 1.0% in June with July activity rebounding 1.1%.
Strength in these areas resulted in output in goods-producing industries rising 1.2% which more than reversed the 0.9% decline in June.
Experts at RBC Economics remarked, "today’s GDP report confirmed expectations of a recovery from the temporary negative impact of the flooding in Alberta and a construction strike in Quebec that weighed on economic activity in June. This recovery is expected to continue in August, particularly the rebuilding in Alberta, that will keep GDP growing in that month though at a more moderate pace relative to July.
"However," the bank concludes, "the bounce higher in July was not as strong as we had assumed and thus suggests Q3 growth closer to 3% relative to our current forecasted increase of 3.4%."
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