Statistics Canada said Tuesday the economy posted next to no growth in July as an uptick in manufacturing and construction was offset by declines in natural resource activity and other sectors, like utilities.
“It was a cool July, both in the weather and Canadian GDP, with the latter only flat on the month,” CIBC chief economist Avery Shenfeld said following the StatsCan release.
Experts had expected the economy to expand by 0.2 per cent in the month, leading to the seventh month in a row of monthly gains.
“After a nice run … the Canadian economy seriously stubbed its toe in July,” BMO chief economist Doug Porter said, adding the monthly reading was “a clear disappointment.”
Both CIBC and BMO trimmed on Tuesday their expectations for overall growth in the third quarter in response to the July reading.
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Shenfeld said the cool summer led to a lack of demand for air conditioning in Ontario and Quebec. Without that boost from utility bills, that sector put a meaningful dent in the economy, he said.
Oil and gas extraction was another main drag, declining 1.5 per cent versus the previous month. “This industry is always a wildcard in any month, but we would look for a rebound in the next few readings,” Porter said.
Lift from assembly lines
Manufacturing however grew a full 1 per cent above June, and has expanded by 4.7 per cent since July 2013, making it the “big winner” in an otherwise lacklustre report. “Higher manufacturing helped to buffer activity,” experts at Capital Economics said.
Demand for Canadian goods and services is coming from the United States, whose far larger economy continues to show sustained upward momentum, experts say — something that bodes very well for Canada over the medium and longer term.
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Experts are banking on manufacturing to pick up the slack being left by households and consumers, which have carried the economy since the recession but now appear to be tapping out.
With towering debt loads and a housing market that’s running out of steam to grow, policymakers are pushing for a “rotation” toward exports and manufacturing to maintain economic growth over the next several years.
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