October 22, 2008

Canadian economy makes strong recovery in July 2008

RICHARD GILBERT

staff writer

The Canadian economy made a strong recovery in July, while growth in the construction sector was unchanged.

According to a report released by Statistics Canada late last month, real gross domestic product (GDP) in Canada expanded by 0.7 per cent in July, after just barely avoiding a recession in the second quarter of 2008.

Real GDP expanded at a very low rate of 0.1 per cent in the second quarter of 2008, following a decline of 0.2 per cent in the first quarter.

“So, just as it seems that almost everyone is throwing in the towel on the Canadian outlook, the economy turns around and posts its strongest monthly advance in more than four years,” said BMO Capital Markets economist James Marple.

“Given the recent swirling financial turmoil, as well as the deep dive in commodity markets, this robust performance no doubt represents the high-water mark for the year.”

The energy sector, which has been down for the last four quarters, accounted for almost half of the increase.

“Oil production grew following the completion of maintenance at petroleum production facilities in Eastern and Western Canada in June.

Following three consecutive monthly declines, natural gas extraction was up sharply and rigging activities surged.

Manufacturing and wholesaling industries also contributed significantly to the advance.

Contrasting that growth, construction was unchanged in July, after two consecutive monthly increases.

“The increase in repair and engineering works was offset by the declines in both residential and non-residential building construction,” said the report. “A substantial decline in construction of single-family homes more than offset the increases in the other categories of residential construction.”

Given the speed at which the economic environment has been changing in the last few months, Marple said the GDP figure for July may feel a bit like an ancient artifact from an archaeological dig.

“It’s a bit of ancient history now, but at the very least it shows the economy had more underlying momentum than anticipated heading into the recent financial hurricane.”

Print | Email | Comment