Canada’s economic growth was “essentially unchanged” in July, Statistics Canada said Friday, but there were signs growth was returning later in the third quarter.
The flat real GDP reading for July came following a modest contraction of 0.2 per cent in June.
Drags in manufacturing were the biggest downward force on the economy in July, with a 1.5 per cent monthly decline marking the largest drop in the sector since April 2021.
The energy sector meanwhile provided some growth in the month, as did bouncebacks in the mining and quarrying and food and accommodations industries, according to the agency.
Early estimates for real GDP in August suggest a 0.1 per cent increase in the month, though StatCan cautions those advance readings can be revised.
The Bank of Canada and many economists have been expecting a period of slower growth for the Canadian economy as higher interest rates cool spending demand and attempt to wrestle inflation back to the central bank’s two per cent target.
“All told, assuming growth remains modest in September as the impact of high interest rates continues to bite, that leaves the Canadian economy on track for a flat-to-very low positive print for all of Q3,” BMO senior economist Robert Kavcic wrote on Friday.
“Recall that the Bank of Canada had assumed 1.5 per cent growth in the July monetary policy report, so we’re on pace to see another undershoot of the near-term forecast.”
The Bank of Canada kept its key interest rate target on hold in September, but said it was prepared to raise rates again if needed to bring inflation back to target.
The central bank’s next interest rate announcement is set for Oct. 25 when it will also release its fall monetary policy report.
— with files from The Canadian Press