UPDATE 2-Canada GDP up for third month after five-month fall

Fri Oct 30, 2015 9:51am EDT
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(Adds market reaction, details on oil and gas investment in paragraphs 3-4, 7, 9)

By Randall Palmer

OTTAWA Oct 30 (Reuters) - The Canadian economy grew in August for the third straight month after contracting in the first five months of the year, with oil and gas continuing to recover and manufacturing also making a contribution, Statistics Canada said on Friday.

Gross domestic product showed an inflation-adjusted increase of 0.1 percent, as forecast in a Reuters survey of analysts, following more substantial boosts of 0.4 percent and 0.3 percent in June and July, respectively.

The fact that the economy has built on July's strong gain bodes well for the third quarter as a whole.

"It basically puts us bang on to the Bank of Canada's 2.5 percent annualized Q3 forecast," David Tulk, chief Canada macro strategist at Toronto Dominion Bank.

The drops earlier in the year were primarily driven by the energy sector, which was badly set back first in exploration and then in extraction by the oil price crash.

The volume of oil and gas output rose 0.3 percent in August, after gains of 2.6 percent and 3.9 percent in June and July. It sat 6.5 percent higher than a year earlier but was still below February's peak.

The biggest hit on the energy sector, in inflation-adjusted percentage terms, has been in reduced investment in drilling and exploration. The category of support activities for mining and oil and gas extraction, which largely reflects such investment, was up 2.9 percent from July but was still a whopping 38.1 percent lower than a year earlier.   Continued...