Canada’s monthly gross domestic product rebounded from three months of contraction to grow by 0.2 per cent in July, as mining, manufacturing and wholesale trade boosted growth, data showed on Friday.
Canada’s GDP had shrunk in the second quarter by 1.6 per cent annualized and economists were closely tracking the July GDP growth figure to get an indication of whether there will be a contraction in the third quarter.
Two consecutive quarters of contraction is considered a technical recession.
A preliminary estimate showed August would most likely see no growth, but would avoid a contraction, Statistics Canada said, as increases in services-producing industries were likely to be offset by goods-producing sectors.
The advanced estimate is not always accurate and could change.
Analysts polled by Reuters had forecast a GDP growth of 0.1 per cent in July, up from a 0.1 per cent contraction in June.
“The Canadian economy continues to hang in there, suggesting no increased urgency for the [Bank of Canada] to cut rates. Still, underlying softness in the economy will likely drive further easing,” wrote Benjamin Reitzes, managing director, Canadian rates and macro strategist at Bank of Montreal.
“BMO is forecasting a pause in October followed by 25 [basis point] rate cuts at the December and March meetings.”
Canada’s economic growth hobbled in the last few months after a strong start this year as a barrage of U.S. tariffs buffeted critical sectors of the economy.
The Bank of Canada has said that trade disruptions and tariffs have significantly hit key sectors, forcing business investments down, and there were chances that the malaise might spill over to other sectors in the coming months.
The growth in July was primarily driven by goods-producing industries, which contribute roughly a quarter to the monthly GDP. This sector grew by 0.6 per cent for the first time in four months.
Mining sector drives growth
The biggest contribution to growth came from mining, quarrying and oil and gas extraction, which registered a bump in growth of 1.4 per cent. The manufacturing sector, which is heavily exposed to U.S. tariffs and contributes up to a tenth of GDP, grew by 0.7 per cent, registering the second-fastest growth.
The services-producing sector, which accounts for three-quarters of the monthly GDP, was less impressive, with a growth of 0.1 per cent, helped by wholesale trade and transportation and warehousing, both of which grew by 0.6 per cent.
The growth in the transportation and warehousing sector, which had contracted by 0.7 per cent in the prior month, was driven by a 2.8 per cent increase in pipeline transportation, marking its largest growth since September 2022, Statistics Canada said.
Real estate and rental and leasing grew by 0.3 per cent in July, posting a new record high for the second month in a row, the agency said, adding that the growth in July was driven by higher activity at the offices of real estate agents and brokers.
The biggest drop was seen in retail trade, which shrank by one per cent in July after solid growth in the prior month.
