September 30, 2020 | 08:56
Cdn. Monthly Real GDP (July 2020) — Slowing Summer Momentum
The Canadian economy continued to rebound from the deep pandemic-driven hole in July, with monthly GDP climbing 3%. That puts the 3-month gain at 15%, leaving GDP 5.8% below February levels. Perhaps the more important part of this release is Statcan estimating that August GDP was up 1%. That's not great, but not bad either. Assuming September slows to half that pace, that would put Q3 GDP growth on track to hit 45% to 50% annualized.
Focusing on July, the recovery continued across the board with every sector seeing firmer activity. The biggest gains were in hotels/restaurants (+20.1%) and arts/entertainment/recreation (+14%), but those figures come off a very low base and are still facing the deepest slump versus year-ago levels. With the resurgence in virus cases, the struggles in those sectors could actually deepen further in the near-term. While most sectors remain down from a year ago, five were higher: agriculture, utilities, retails, finance and real estate. The latter two are benefiting from the red-hot housing market and record-low mortgage rates. Interestingly, the goods and services sectors are both down about 5% y/y, with services rebounding faster after a deeper initial dive.
Key Takeaway: The recovery continued with all sectors participating in July. Looking ahead, while there may be some disappointment with the August growth estimate of 1%, decelerating momentum should be fully expected. Perhaps the bigger concern is that a second wave of COVID cases could prompt another round of shutdowns, or a broader slowing in activity, when the economy still faces a deep hole to dig out of.