By Gordon Isfeld
OTTAWA (MaceNews) – The Canadian economy stalled in July after a four-month growth spurt, as major sectors such as manufacturing, construction, and oil and gas showed signs of weakening.
“Following four months of growth, real gross domestic product was essentially unchanged in July as a decline in goods-producing industries was offset by an increase in services-producing industries,” Statistics Canada said Tuesday.
GDP was flat in July after expanding 0.2 percent in the previous month. The 0.0 percent monthly growth reading reflected a 0.7 percent decline in output by goods producing industries, offset by a 0.3 percent increase by services. Mining and oil & gas extraction output contracted by 3.0 percent in July and accounted for the bulk of the decline by goods producing industries.
Oil and gas extraction output fell 4.7 percent, the largest monthly decline in a decade, mostly as a result of a maintenance shutdown at Newfoundland and Labrador offshore production facilities.
The construction sector was also a negative in July, contracting 0.7 percent and largely offsetting growth in the previous two months, with residential construction down 1.0 percent. Meanwhile, the pace of contraction in manufacturing slowed, edging down 0.1 percent in July following a 1.3 percent drop previously, as inventory building nearly balanced out sales declines.
The manufacturing output eased lower by 0.1 per cent in July after a bigger drop of 1.3 per cent in June. Meanwhile, the residential construction sector declined by 0.7 per cent in July, coming after two straight monthly advances.
“A drop in manufacturing activity, lower oil production . . . (had been) expected to weigh on the headline,” said economist Benjamin Reitzes, at BMO Capital Markets.
“On the positive side, wholesale activity was solid for a second straight month, home sales perked up and warm weather likely boosted utilities following a few soft months.”
Meanwhile, looking ahead to Wednesday, many analysts are anticipating a mild widening of the merchandise trade deficit during August, likely by $1.3 billion in Canadian currency due to a decline in energy exports.
At the same time, imports could see a slight increase. “After net exports were the main contributor to Q2 GDP growth, it looks as though trade will be more neutral in Q3,” according to BMO analysts.
Central bank Governor Stephen Poloz and his monetary policy team will announce their next rate decision on October 30, along with the release of their quarterly Monetary Policy Report that will focus on economic growth outlooks in Canada and globally.
Canadian GDP had been expected to edge up by 0.1 per cent in July, continuing a weakening trend for the fourth consecutive month.