OTTAWA, 27 September – Statistics Canada announced that Canada’s real GDP grew by 0.2% in July, following a stagnant performance in June, primarily fueled by gains in the retail trade sector. However, the agency’s early estimate for August suggests that growth may have stalled, as the economy is expected to remain flat.
The growth in July was mainly attributed to services-producing industries, which expanded by 0.2%. The retail sector was the largest contributor, with a 1% increase, particularly in the motor vehicle and parts subsector, which surged by 2.8%. Additionally, the public sector, including education, healthcare, and public administration, rose by 0.3%, while the finance and insurance sector grew by 0.5%.
Goods-producing industries experienced a modest 0.1% growth, with the utilities sector rising 1.3%, and manufacturing expanding by 0.3%. However, wildfires disrupted several sectors, with transportation and warehousing declining by 0.4% due to rail suspensions in Jasper National Park. Accommodation services fell 2% as fires in Western Canada also impacted the tourism industry. Mining operations in Labrador and northern Quebec were similarly affected by the fires.
While July’s performance exceeded expectations, economists are cautious about the outlook for the third quarter. TD Bank economist Marc Ercolao noted that upcoming labor and inflation data will be key to the Bank of Canada’s decision on further interest rate cuts in October. Despite recent progress on inflation, analysts predict that the central bank may reduce interest rates by 50 basis points next month.
The Bank of Canada has already implemented three quarter-point rate cuts this year, bringing its policy rate to 4.25%. Governor Tiff Macklem indicated that future rate cuts are likely, although their timing will depend on forthcoming economic indicators. The Bank of Canada’s next interest rate decision is expected on October 23, along with updated economic forecasts.
