Canadian economy rebounds out of technical recession

The federal agency revised June’s gain down to 0.4 percent from 0.5 percent, mainly due to an upward revision in the dollar level of May’s GDP from the previous estimate.

However, there were encouraging signs, with households’ disposable incomes rising two per cent on the previous quarter; 3.7 per cent on the same period a year before.

Driving the growth in July was a 9.1 per cent improvement in non-conventional oil extraction, which includes the Alberta oilsands, following a 7.0 per cent gain in June.

By that metric, the recession that Canada’s economy entered into during the first half of 2015, was marginally worse than originally thought. Growth has been a key topic ahead of an October 19 election with Prime Minister Stephen Harper touting the virtue of his move to balance the budget and saying that more than 80 percent of the country’s industries are growing.

“Growth looks like it’s going to be pretty solid in the third quarter”, said Benjamin Reitzes, senior economist at BMO Capital Markets. On its own, the energy sector grew 2% in July, or the strongest showing in 10 months.

July’s index of services, on a quarterly basis, was in keeping with forecasts for 0.8%, and up from 0.7% previously. The weaker currency makes Canadian goods cheaper in the USA, which buys three-quarters of its northern neighbor’s exports.

“We’ve seen a better trend for manufacturing generally, for the past five months”.

“We believe that it is now an extremely tight call as to whether the Bank of England lifts interest rates from 0.5 per cent to 0.75 per cent around February, or holds fire until nearer mid-2016”. Other readings on the economy from the GDP report were a bit more “subdued”, he said. However TD Bank economist Diana Petramala cautioned that while the third quarter was looking stronger than expected, questions remain about whether the pace will be sustained in the last three months of the year.

“It remains the sharpest downturn and slowest recovery on record”. Oil prices fell below $40 a barrel last month, consumer spending may be limited by high debt loads, a few governments are curbing spending and exports have suffered from years of weak global demand.