Trade Desk Thoughts - CAD GDP

CAD GDP (July) Actual 0.7%, Expected 0.2%, Previous 0.1%

Release Explanation: This report measures the monetary value of all goods and services produced within a Country’s borders in a specific time period. GDP is calculated on an annual basis, is the broadest measure of activity, and the primary gauge of each economy’s overall health. It includes all Company and Personal consumption, government outlays, investments, and exports less imports, that occur within a defined territory.

A strong annual GDP outlook will lead to strong investment in an economy especially from overseas. A weak annual GDP outlook will usually lead to a slowdown in the economic business cycle. The yearly forecast is as important as the actual release number. As a reflection of the value of what an economy is producing, GDP will invariably have a ripple effect across all other economic releases, over a period of time: TIC Data because of overseas investors wanting to participate in future growth, or liquidate investments in an economy moving into a period of contraction. CPI because a reducing GDP outlook will therefore reduce the rate of future Inflation, as an increasing GDP outlook will likely lead to Inflationary pressures. Retail Sales, Consumer Confidence, PCE, they all are affected by the strength or weakness of GDP. A volatile release because just one airplane order not accounted for can move the number by 0.5% and therefore lead to volatile re-alignments of Currency positions.

Trade Desk Thoughts: Real gross domestic product increased 0.7% in July after advancing 0.1% in June and retreating 0.1% in May. The energy sector, which has been trending down during the last four quarters, accounted for almost half of the July increase. Manufacturing and wholesaling industries also contributed significantly to the advance.

Output of the energy sector increased 3.1% in July. 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, as storage levels were being replenished. Services to oil and gas extraction facilities were up significantly as rigging activities surged in July, while contract drilling dipped slightly.

The manufacturing sector advanced 1.3%. The increase was broadly based, with 17 of the 21 major groups posting a gain. Wholesaling activity advanced 1.9% in July. Increases were widespread within the sector, notably in the wholesaling of automotive products. Food products wholesalers were the only sub-sector to record a decline in activity in July. The finance and insurance sector advanced 0.3% in July on the strength of banking. After two consecutive monthly increases, construction was unchanged in July. Value added in the retail trade sector was unchanged for July, following three consecutive monthly advances. There was higher activity at gasoline stations, computer stores and alcoholic beverage vendors and significant declines in the volume of sales of building materials and convenience stores. The volume of activities of new and used car dealers was down.

Forex Technical Reaction: The cad advanced in the minutes after the release. Crude futures are up $1.20 and gold is down $3.20.

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