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Canada GDP To Rise Slightly In August

Oct 31 2019, 02:25 PM (BDT) | Orbex.com

Canada will be releasing the monthly GDP numbers today. Forecasts show that on a month over month basis, the GDP will rise by 0.2% on the month.

This comes after the previous month in July saw a flat print or stagnant growth.

But the expectations come amid mixed reports during the month from Canada.

The lower expectations come largely on the back of weaker wholesale sales during August. Wholesale sales fell 1.2% on a month over month basis in August. The data signals weaker demand downstream and could influence the GDP numbers.

Canada GDP

Canada GDP, July 2019

Five out of the seven sectors saw a contraction during the period. This is likely to see Canada’s GDP and possibly the labor market slowing in the coming months. However, the downside risks aren’t high enough right now to create concerns from a monetary policy level.

In the past three quarters, the Canadian economy showed a strong performance in just one. The third-quarter GDP is currently tracking at 1.5% on the year. This came on the back of a weak second-quarter performance.

In the year ending in the third quarter of 2019, Canada’s GDP has been at the lower end of the BoC’s forecasts. For the full year, the Bank of Canada forecast that growth would average around 2.1% but that it would slow to the range of 1.3% – 2.1% by next year.

During the year, Canada’s GDP rose by 0.5% in March. But, since then, it has been consistently trending lower. Following a 0.3% increase in the following months, July’s growth was flat.

August GDP Figures to be Transitory?

The slow patch of growth during August could merely be transitory. The Bank of Canada initially set out with the view that the first half of the year would see slower growth. But, it expects growth to pick up into the second half of the year.

With the August data, this very well falls within the purview of the second half of the year. Indeed, various other indicators that feed into growth saw a robust, if not resilient, increase.

Canada’s GDP was flat in July. This was largely due to a slump in the oil and gas extraction sector. The forecasts back then were to see a growth rate of 0.1% on a month over month basis.

There was also a slowdown in other sectors. It would be interesting to see if there is some increase in activity in the very sectors that were slow during the previous month.

For example, the goods-producing sector was down by 0.7%. The mining, quarrying and oil and gas extraction sectors fell 3.5%. This was the biggest drop in this sector since May 2016.

The services-producing sector rose by 0.3%.

With the wholesale sales coming out lower, there is scope for growth to slow without a doubt. Oil prices were relatively stable during August, albeit lower. Therefore, economists will also be keeping an eye on the performance in the oil and gas extraction sector.

Impact of Canada’s GDP on the Markets

Today’s GDP report comes on the back of a busy week. The Bank of Canada kept interest rates unchanged and the impact of today’s GDP figures will not see much of a response from the markets.

The Canadian dollar already made some major gains. This indicates that investors have already priced in the available news. Therefore, focus will clearly shift to the upcoming months.

It is very likely that Canada could close out the year on a relatively stronger note.

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