- Canadian economic output was effectively flat in July, disappointing market expectations for a 0.1% m/m gain. Only 12 of the 20 major industry groupings reported rising output.
- Goods producing industries led the decline (-0.7% as a whole). Mining, quarrying, and oil and gas activity pulled back markedly (-3.5%) on broad-based weakness, made worse by a facility shutdown in Newfoundland and Labrador. Construction activity also disappointed (-0.7%) as a gain in single detached home activity was offset by contractions elsewhere. Manufacturing was down, but only 0.1%, as inventory buildups offset the previously-reported sales decline.
- It was a brighter picture among service-producers (+0.3%), with wholesale trade (+1.1%), professional services (+0.8%) and real estate (+0.4%) leading the way.
Key Implications
- Look closer. Today’s headline was definitely soft, but the underlying story was not. If it weren’t for the drag from the energy/mining sector, we’d have had a repeat of June’s solid performance, even with the relative lack of growth breadth. If you’re looking for generalized weakness in Canada’s economy, today’s report ain’t it.
- Thus, the story continues: we still look for a step-down in the pace of growth in the third quarter, but with better details. We continue to track a bit north of 1.0% annualized growth.
- This data is likely to leave the Bank of Canada happy with their current wait-and-see approach. Governor Poloz and company are looking for signs of the global trade and manufacturing slowdown manifesting in the Canadian data. For now, the waiting game continues.
