September 29, 2022 | 09:04
Cdn. Real Monthly GDP (July) — Slowing Summer Momentum
The Canadian economy unexpected grew in July, with GDP rising 0.1%, two ticks better than the consensus and flash estimates. Goods-producing sectors drove the increase, with big gains in agriculture (+3.2%), mining/oil/gas (+1.9%) and utilities (+1.6%). Manufacturing and construction activity pulled back slightly, with the latter falling for a fourth straight month as higher interest rates take a toll. Services sectors were mixed with about half flat or lower. Retail (-1.9%), hospitality (-1%) and wholesale (-0.7%) were the big drags. The drop in hospitality is a bit surprising as pent-up demand was being unleashed in the sector throughout the summer and activity remains below pre-pandemic levels. Perhaps surging prices are having an impact?
The flash estimate for August GDP is for a flat reading. Firmer retail, wholesale and agriculture activity were offset by weakness in manufacturing and mining/oil/gas according to the preliminary data. That looks like a reversal of the picture for July.
Key Takeaway: The surprise increase in July GDP puts Q3 growth on better footing than expected. Quarterly GDP is on track for a modest gain, in line with our call for a 1% annualized increase. However, after a solid first half of the year, momentum appears to be slowing as multi-decade high inflation and rapidly rising interest rates weigh on the economy.