Canadian economy grows for second consecutive month

The world’s 11th largest economy is poised to rebound this quarter after contracting in the first half, weakened by a drop in commodity prices, Bank of Canada Governor Stephen Poloz predicts.

The sector, which accounts for almost 80% of UK GDP, grew by just 0.2% in July, down from 0.6% in June.

After Canada’s economy contracted in the first two quarters of this year, meeting the textbook definition of a technical recession, evidence the worst is over has started trickling in for the Group of Seven’s biggest oil exporter.

Growth in June reversed the trend and many economists expect the economy to perform better in the second half of the year. The output of goods-producing industries rose 0.8 per cent in July after a 0.7 per cent increase in June, which followed five consecutive monthly declines from January to May.

The Office for National Statistics (ONS) said the rate of expansion was unchanged from its previous estimate, published a month ago, and the data was in line with many economists’ forecasts.

However, year-on-year growth in the second quarter was trimmed to 2.4 per cent, down from the previously reported 2.6 per cent.

Meanwhile, household data was stronger in the second quarter, with disposable income increasing 2% between Q1 and Q2 this year, while households’ saving ratio was estimated to be 4.7% in Q2, compared with 4% in Q1.

“We’ve been talking about how our low tax plan for jobs and growth is working, that we must stay the course, particularly in the context of global instability”.

The increase in July was due to the rise in mining, quarrying, oil and gas extraction, and manufacturing.

Non-conventional oil extraction grew 9.1% for the month, following a 7.0% gain in June following maintenance shutdowns and production difficulties in April and May.

With these numbers in, many economists are now predicting that Canada will nearly double the 1.5-per-cent growth rate that the Bank of Canada had predicted for the third quarter.

Important drags remain on Canada’s recovery.

“It might even suggest we might be on the higher side of that range”, said Benjamin Reitzes, senior economist and foreign exchange strategist at BMO Capital Markets.