Canada July economic growth bodes well for third-quarter rebound

Fri Sep 30, 2016 9:09am EDT
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By Leah Schnurr

OTTAWA (Reuters) - The Canadian economy got off to a stronger-than-expected start in the third quarter, fueled by a rebound in oil and gas extraction that had been disrupted by wildfires in Alberta earlier this year.

Friday's report from Statistics Canada reinforced expectations that the economy recovered in the third quarter and likely provided room for the Bank of Canada to leave interest rates where they are for now, economists said. The bank next meets in October.

Gross domestic product grew 0.5 percent in July, topping analysts' forecasts for a gain of 0.3 percent.

Activity in the mining and oil and gas extraction sector jumped 3.9 percent. The non-conventional oil extraction sector surged 19 percent as production returned to normal after the wildfire and maintenance shutdowns in April.

"All in all a solid report," said Andrew Kelvin, senior rates strategist at TD Securities.

"It really hammers home the idea that the Bank of Canada is going to be on hold for the rest of the year."

Canada's economy shrank in the second quarter due to weak exports and the impact of May's wildfires in the oil-producing province of Alberta.

While economists widely expect relatively strong growth in the third-quarter, there is more uncertainty over whether the pace can be sustained.   Continued...

The Kit and Ace flagship store is pictured in Vancouver, British Columbia October 17, 2014. REUTERS/Ben Nelms