The Canadian economy grew in July but any momentum may have been short lived, Statistics Canada said Friday.
Real gross domestic product grew 0.2 per cent in July, marking the first signs of growth in four months. Real GDP declined 1.6 per cent on an annualized basis in the second quarter.
The growth in July was a bit faster than economists' expectations heading into the release.
Statistics Canada said the growth in July was driven by goods-producing industries, which grew 0.6 per cent for the month.
TD Bank economist Marc Ercolao said in a note to clients Friday that gains in July were concentrated in sectors hit hard by U.S. tariffs, suggesting those industries are starting to stabilize after the trade shock.
The mining, quarrying, and oil and gas extraction sector added 1.4 per cent in July as mining and quarrying, except oil and gas, rose 2.6 per cent. The oil and gas extraction subsector grew 0.9 per cent in July.
The manufacturing sector grew 0.7 per cent as durable goods manufacturing grew 1.0 per cent. Non-durable goods manufacturing rose 0.4 per cent.
However, Statistics Canada noted in a special bulletin on the steel sector that U.S. President Donald Trump's move to double tariff levels on the industry in June hit metals manufacturers hard in July.
Activity in iron and steel mills and ferro-alloy manufacturing group was down 19 per cent in July, the agency said.
Meanwhile, services-producing industries edged up 0.1 per cent as the transportation and warehousing sector rose 0.6 per cent. The retail trade sector fell 1.0 per cent.
Statistics Canada's early estimates suggest the economy showed no growth in August.
Gains in wholesale and retail trade last month were offset by declines in mining and quarrying, oil and gas extraction, manufacturing and transportation and warehousing, the agency said.
"The Canadian economy took a slightly bigger-than-expected step forward in July, only to stumble again in August," said CIBC senior economist Andrew Grantham in a note to clients.
The Bank of Canada cut its benchmark interest rate by a quarter point to 2.5 per cent last week as policymakers said the balance of risks was shifting toward a weakening economy and away from rising inflation.
Even with the stronger July, activity for the third quarter is tracking slightly weaker than projections in the Bank of Canada's most recent outlooks, Grantham said.
He said that sets the central bank up for one more rate cut, perhaps as early as its decision at the end of October, depending on the inflation and labour market data still to come.
Ercolao also said he expects the Bank of Canada will cut again before the end of the year as growth rebounds modestly but slack remains in the economy.
Picture Courtesy: THE CANADIAN PRESS/Sean Kilpatrick
