The Canadian economy performed slightly better than analysts predicted in August.
Figures released this morning by Statistics Canada show August Gross Domestic Product rose a strong 0.3% and compared to market expectations of only a 0.1% gain in the month. The increase built further onto the strong, and unrevised, 0.6% gain in July thus more that reversing the 0.5% drop in June. A large part of that June weakness reflected the temporary impact of the Alberta floods and a construction strike in Quebec. The rise in July and August reflected a more than full reversal of these negative factors.
The increase in the month reflected strength in both goods-producing and service-producing industries with the former slightly outpacing the latter 0.4% versus 0.3%. The gain in goods-producing was led by a 1.9% jump in the mining, oil and gas extraction component following a 1.5% jump in July. This likely in part reflects a continued recovery in the energy sector after the flooding in Alberta weighed on activity in June.
"The more than full reversal in August and July of the decline in June GDP," to quote experts at RBC Economics, "sets up for the Q3 annualized growth rate bouncing up to an above-potential 2.8% from Q2’s below-potential 1.7%. The expected Q3 increase would be well above the Bank of Canada’s forecast of 1.8% that was released in the October 23 Monetary Policy Report.
"However, if realized," the bank concludes, "it is not expected to result in any immediate change to the inflation backdrop with both the headline and core rates holding in the lower end of the Bank of Canada's target in the third quarter. "
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