Canada’s economy saw a turnaround in July, with monthly gross domestic product (GDP) growing by 0.2%, following three consecutive months of decline. Key sectors such as mining, manufacturing, and wholesale trade drove this growth, as per recent data.
The GDP had contracted by 1.6% in the second quarter, prompting economists to closely monitor the July figures for signs of a potential third-quarter contraction, which could lead to a technical recession after two consecutive quarters of decline.
Statistics Canada indicated that August was likely to show no growth but avoid contraction, with services industries’ growth potentially offsetting declines in goods-producing sectors. However, it’s important to note that advanced estimates can be subject to revisions.
Analysts had anticipated a 0.1% GDP growth for July, an improvement from the 0.1% contraction in June. Canada’s economic growth had slowed in recent months due to the impact of U.S. tariffs on critical sectors, causing disruptions and decreased business investments.
The growth in July was primarily attributed to the goods-producing industries, which constitute about a quarter of the monthly GDP. This sector expanded by 0.6% for the first time in four months.
Among the sectors driving growth, mining, quarrying, and oil and gas extraction saw a significant increase of 1.4%. The manufacturing sector, highly affected by U.S. tariffs and contributing up to a tenth of the GDP, grew by 0.7%, showing the second-highest growth rate.
On the services side, which accounts for three-quarters of the monthly GDP, growth was more modest at 0.1%, supported by gains in wholesale trade and transportation/warehousing, both growing by 0.6%.
Transportation and warehousing, which had contracted by 0.7% previously, rebounded with a notable 2.8% growth in pipeline transportation, the highest since September 2022. Real estate and rental/leasing also saw an uptick of 0.3% in July, reaching a new record high for the second consecutive month, driven by increased activity in real estate offices.
However, retail trade experienced a decline of 1% in July after a period of solid growth in the preceding month. The Bank of Canada highlighted the impact of trade disruptions and tariffs on key sectors, leading to decreased investments and potential spillover effects on other sectors in the near future.