Canada: GDP growth remains robust - Nomura

Research Team at Nomura, notes that the Canada’s monthly GDP rose 0.5% m-o-m in July, stronger than market expectations, and following a 0.6% m-o-m increase in June.

Key Quotes

“This is the second consecutive month of strong gains in GDP growth following the sharp contraction in May owing to disruptions caused by the wildfires in Alberta.

The goods-producing side of the economy rose 1.0% on the month, led primarily by gains in mining, quarrying, and oil and gas extraction (+3.9% m-o-m), as non-conventional oil production surged 19.3% m-o-m as production continues to normalise following wildfire-related disruptions. Other categories such as agriculture (+1.00% m-o-m), utilities (+0.5% m-o-m) and manufacturing (+0.4% m-o-m) also contributed positively to growth. On the flip side, the construction category (-0.8% m-o-m) made a negative contribution to m-o-m growth for the fourth consecutive month.

The services sector increased 0.3% m-o-m in July, with most sectors posting an increase. Strong gains in finance and insurance (+0.9% m-o-m), transportation and warehousing (+1.1% m-o-m), and accommodation and food services (+1.4% m-o-m) led the gains. Three high-level categories served to offset these otherwise broad gains: management consulting services (-0.5% m-o-m), other services (ex. public administration) (-0.2% m-o-m) and public administration (-0.6% m-o-m).

Overall, the report shows modest growth in July, with growth excluding mining, oil and gas, coming in at a more modest +0.2% m-o-m. The strength in the oil sector is linked to continued normalisation of production following disruptions from the wildfires and there are some early indicators that oil production may have reached a record in August. Despite the robust growth over the past two months, the big question for the BoC is export performance, increasing the importance of Wednesday's (5 October) trade report.”