Canada’s economy pauses in July easing rate hike expectations

Recent pace of growth over the last year won't be sustained going forward: RBC

OTTAWA — Canada’s eight-month march of monthly growth in the economy came to an end in July, according to Statistics Canada, a development that could head off more rate hikes this year.

Gross domestic product was essentially unchanged, at 0% growth in July compared with June, Statistics Canada said.

Economists said the lack of growth in July supports Bank of Canada governor Stephen Poloz’s cautious approach to increasing interest rates in a speech.

The central bank raised rates twice over the summer following the economy’s surprisingly powerful start to the year.

“The (unusually) long streak of increases over the prior year means that GDP was still up a solid 3.8% year-over-year in July, reflecting broadly-based gains across goods and services sectors,” said RBC senior economist Nathan Janzen in a report.

“More broadly, the slowing in GDP growth in July is consistent with our – and the Bank of Canada’s – view that the recent outsized pace of growth over the last year won’t be sustained going forward.”

He said RBC is sticking with its prediction of GDP growth of 2.5% in the third quarter, adding that pace could still justify further gradual rate hikes from the central bank.

“We suspect that the slower start to Q3 gives us the flavour of things to come, with our forecast for the back half of the year tracking half the pace seen at the start of 2017,” said CIBC economist Nick Exarhos in a note.

“That’s another reason why we see the Bank of Canada using a more gentle hand with tightening from here.”

Most of the July weakness was in goods production which had a contraction of 0.5%, while the oil and gas subsector shrank 1.8%, with declines in both conventional and non-conventional production.

The manufacturing sector also fell 0.4% overall, mostly because of declines in motor vehicle manufacturing and parts.

Service industries posted overall growth of 0.2%, led by wholesale trade, which was up 2%, the highest monthly gain since September 2014.

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Received Id 1751967245 on Sep 29 2017 12:47

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1 Comment » for Canada’s economy pauses in July easing rate hike expectations
  1. Randy says:

    Now that Bill and Justin have announced their plan to attack real business creators from the middle class one can expect contraction as business moves investment out of Canadstan. This Liberal government is chasing investment away at an alarming rate. Yet the real tax cheats as in Trudeau, Morneau and Butts laugh at their distruction of an economy that was producing wealth for the middle class. Yep we were definitely better off under Harper.

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