The economy grew 0.1 percent in July, compared to forecasts for a 0.1 percent decline, but inflation continued.
Canada’s economic activity unexpectedly rose in July, data shows, while gross domestic product (GDP) in August may have been flat, and the surprise was not expected to change much for housing. central bank. Canada’s economy grew 0.1% in July, while analysts had predicted a 0.1% decline, according to Statistics Canada data released on Thursday. Growth in industrial output more than offset the first decline in industrial output since January. “The economy went better than expected this summer, but the performance was not much to write home about,” Royce Mendes, head of macro strategy at Desjardins Group, said in notes.
The small gains in July and likely lack of growth in August suggest a three-quarter annual GDP growth of about 1 percent, which is below the Bank of Canada’s most recent forecast. of 2.0 percent, analysts said. “After a strong first half, the fire appears to be slowing down as multi-decade high prices and fast-rising interest rates in the economy,” said Benjamin Reitzes, Canadian rate and major strategist at BMO Economics said, in a note.
The Bank of Canada raised rates by 75 basis points to 3.25% earlier this month to tackle inflation, which started to ease slightly in July but has continued to run at record lows for almost if 40 years. GDP data for July showed oil sands production picking up growth, jumping 5.1% to higher output, and agricultural output also rising, up 7.2%, mainly due to higher wheat and other grains.
Demand for Canadian wheat has increased since Russia invaded Ukraine on February 24, which Moscow called a special military operation, helping boost export volumes. But Canada’s retail sector fell sharply in July, falling to its lowest level since December 2021, down from a 7.1% drop in oil prices, Statscan said.
Accommodation and food services also gained in July, with small jobs in bars and restaurants. Higher rates mean the Bank of Canada will raise interest rates in its next decision at the end of October, but that could change then, economists said.
“The rapid deterioration of the economy is why we see the Bank of Canada raising rates again in October,” Mendes said. Financial markets are betting on a rate hike in October, with another in December or January taking the central bank’s interest rate to 4.00%.
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