Canada economy grows 0.3 percent in August, outlook modest

Thu Oct 31, 2013 10:27am EDT
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By Louise Egan

OTTAWA (Reuters) - Canada's thriving oil and gas industry helped the economy grow by 0.3 percent in August from July, confirming modest growth that is expected to keep the Bank of Canada's key interest rate on hold for more than a year.

The monthly gross domestic product data, released by Statistics Canada on Thursday, showed the economy continues to bounce back from a downturn in June caused by severe flooding in the nation's oil capital Calgary and a strike by construction workers in Quebec.

The economy contracted 0.5 percent in June and then unexpectedly surged by 0.6 percent in July.

The gain in August was a notch stronger than expected. Analysts in a Reuters poll had forecast, on average, a 0.2 percent expansion.

Despite evidence the economy is regaining some lost momentum, Mazen Issa, macro strategist at TD Securities in Toronto, said the outlook remains pretty tame.

"From a broader perspective I don't think it changes the narrative of a sluggish backdrop that has been holding in Canada through this year and is expected to persist in the balance of the year and into next year," he said.

"From a policy perspective, probably not too much impact for the Bank of Canada."

The Bank of Canada last week cut its forecast for third-quarter growth to 1.8 percent, annualized, from 3.8 percent but economists said the data suggests the final number will be closer to 2.5 percent.   Continued...

People walk by a Loblaw Companies Limited grocery store with a Joe Fresh clothing store inside, on the day of the annual general meeting of shareholders in Toronto, May 2, 2013. REUTERS/Mark Blinch