Canada: GDP growth slows in July, but remains robust nonetheless
September 30, 2020
The economy grew 3.0% month-on-month in July, easing from June’s 6.5% increase and matched Statistics Canada’s preliminary estimate. The economy declined 5.0% year-on-year in July, which was much softer than June’s 7.7% drop.
Moreover, on 30 September, Statistics Canada released a special flash estimate of GDP for August to provide a snapshot of the state of the economy. The preliminary figure pointed to a 1.0% increase in activity on a month-on-month seasonally-adjusted basis. Despite not releasing a detailed breakdown, the flash estimate attributed the pullback in August to flagging output in the retail and wholesale trade, and public administration sectors.
In July, growth in the goods-producing industries eased, particularly due to easing construction and manufacturing activity. In terms of services-producing industries, the wholesale and retail trade, and transportation and warehousing sectors rose increased albeit at a softer pace relative to the previous month.
Looking ahead, the economy should continue to gradually recover towards the end of the year as lockdown measures continue to ease. Furthermore, ample fiscal stimulus and monetary easing should also provide support to activity. Nevertheless, oil production cuts and depressed activity in the U.S. poses a significant downside risk to the outlook.
Commenting on July’s GDP reading, Sri Thanabalasingam, a senior economist at TD Economics, noted:
“Slowing and uneven growth are indications that the Canadian economy is transitioning from the rebound phase to a more challenging stage of the recovery. From here on in, the journey to "normal" could see temporary stalls and bouts of turbulence […] Alarming trajectories in new COVID-19 cases in provinces like Quebec and Ontario have already caused governments to rollback reopening measures. Even without restrictions, consumers and businesses may rein in spending activity in response to rising caseloads. The second wave is now upon us, and the course of the recovery will depend on our success in containing it.”
Author: Steven Burke, Economist