Canada: Economy is likely to show more signs of fatigue – CIBC

Data released today showed that GDP growth in Canada stalled in July. Analysts at CIBC, explained that the economy is likely to show more signs of fatigue, particularly given the slowing in global conditions seen recently.

Key Quotes: 

“After registering a very hearty end to the first quarter, the Canadian economy has seen growth decelerate in each subsequent month, culminating in today’s flat reading for July. It was maintenance at a major offshore oil production facility that led to the greatest drag, a development that should have reversed in the ensuing months. But neither bringing that facility back online, nor increasing oil production as Alberta’s mandated restraint was further scaled back, represent sustainable growth. Following any one-off rebound, the economy is likely to show more signs of fatigue, particularly given the slowing in global conditions seen recently.”

“Construction activity was another soft spot in the report, albeit much less of a drag than the oil and gas sector.”

“While the big winners in the report weren’t all that big, wholesaling, retailing and real estate among others did enough to save the economy from contracting in July. Utilities also rose, but that coincided with heatwaves across parts of the country and may have reversed in August and September as those extreme conditions abated.”

“It was a mixed bag of ups and downs for the economy in July, but what seems clear is that any rebound in growth from here on out will likely only be the short-lived result of oil production returning to more normal levels. Tracking for the third quarter is still running a touch ahead of the Bank of Canada’s last projection of 1 ½%, but with the external environment looking weak and domestic households no longer as spendthrift, a rate cut around the turn of the year is still in our base-case forecast.”