Canadian gross domestic product (GDP) rose by 0.1% in August 2015 following unrevised gains of 0.3% and 0.4% in July and June, respectively. Market expectations had been for a 0.1% increase in August.
The increase in August partly reflected continued gains in goods production of 0.3% following sizeable 0.7% and 0.8% increases in July and June, respectively.
Service-producing industries rose by 0.1% following gains of 0.1% and 0.3% in July and June, respectively.
Canadian GDP rose by 0.1% in August 2015 following unrevised gains of 0.3% and 0.4% in July and June, respectively. The increase reflected gains in goods-producing industries of 0.3% and in the services sector of 0.1%.
The increase in goods-producing industries of 0.3% represented the third consecutive month of increases although with the pace slowing from gain of 0.7% and 0.8% in July and June, respectively. The mining sector unexpectedly increased in the month by 0.4%, although the gain was down sharply from increases of 2.4% and 2.6% in the previous two months, respectively. Manufacturing output rose by a solid, and expected, 0.4% and followed increases of 0.6% in the previous two months.
The 0.1% increase in service-producing industries matched the downwardly revised gain in July (0.2% previously). The month saw output in a number of services sectors moving lower in the month. The 0.5% drop in wholesale trade had been earlier flagged by the wholesale trade report. The 0.9% decline in the arts, entertainment, and recreation component followed the 2.0% drop in July, as output continued to unwind the 6.9% surge in June reflecting the effect of the Women's World Cup soccer matches held throughout the country during that month. Going into the report, there had been the risk of an even larger retracement. A less anticipated decline was the 0.2% drop in finance and insurance, although this component was up very strongly in both July (0.8%) and June (0.7%).
Although modest, the gain in August GDP built on solid increases in July and June. We expect this string of GDP increases will be interrupted in September by a sharp pullback in non-conventional oil extraction due to a fire-related temporary shutdown of a major oil sands project for most of the month. Data to date, however, still leaves third-quarter 2015 GDP tracking in line with our (and the Bank of Canada's) forecast for a 2.5% gain. Although investment in the oil and gas sector is likely to continue to decline, the temporary hit to actual oil extraction in September should reverse in October as oil sands production has come back online. We continue to expect growth outside of the oil and gas sector to strengthen, with continued growth in household spending and a stronger external demand backdrop reflecting a strengthening US economy and weaker Canadian dollar. We expect growth in the economy will be strong enough going forward that the Bank of Canada will not view further rate cuts as needed, although we do not expect a hike in the overnight rate until late next year when more substantial progress has been made in absorbing excess slack in the economy.
