October 1, 2019 / 1:14 PM / 22 days ago

Canada's GDP flat in July as oil and gas extraction shrinks

OTTAWA (Reuters) - Canada’s economy was unexpectedly unchanged in July, following four months of growth, as the country’s mining, quarrying and oil and gas extraction sectors contracted, Statistics Canada data showed on Tuesday.

FILE PHOTO: Double-crested cormorants nest on a tree in front of the skyline as a plane flies by during sunset at Tommy Thompson Park, located on a man-made peninsula, known as the Leslie Street Spit, in Toronto May 26, 2015. REUTERS/Mark Blinch/File Photo

Analysts in a Reuters poll had predicted an increase of 0.1% in July following a 0.2% increase in June. Overall, 12 of the 20 industrial sectors monitored expanded on the month, while eight declined, the national statistics agency said.

The Canadian dollar weakened to C$1.3290 or 75.24 cents U.S. after the July GDP miss.

Canada is in the midst of a national election set for Oct. 21 where economic issues, like the cost-of-living, have played a central role on the campaign trail. Meanwhile, the Bank of Canada has held interest rates steady since last October as it monitors Canadian economic data.

“Today’s data are consistent with the [Bank of Canada’s] view that growth over the second half of the year is likely to be slightly slower than the first half,” said Josh Nye, a senior economist with RBC Economics, adding there were “few signs of a broader slowdown.”

“That gives the central bank time to be patient in assessing whether a bit more accommodation is needed to offset external headwinds,” Nye said in a note.

Statscan said goods-producing industries were down 0.7% in July as outputs from all sectors - excepting utilities - declined. Services-producing industries were up for the fifth consecutive month, rising 0.3% as the majority of its subsectors grew.

Canada’s mining, quarrying and oil and gas extraction sector dropped by 3.5% in July, the largest decrease since May 2016, Statistics Canada said. Support activities for those same industries slumped by 11.5%, the largest decline since December 2018, following three consecutive months of growth, as drilling and lower rigging services contracted.

Oil and gas extraction (except oil sands) fell 4.7%, the biggest monthly decline seen in a decade, the agency said - thanks, in large part, to a shutdown of some offshore production facilities in Newfoundland and Labrador because of maintenance issues.

Declines were also reported in the construction sector, which dropped by 0.7%. Manufacturing fell for the second straight month, falling 0.1%, while the transportation and warehouse sector contracted by 0.5% on slower rail transportation.

Real estate and related industries increased 4.2%, while utilities rose by 1.5%. Wholesale trade jumped 1.1%, the sixth increase in seven months, Statscan said.

(Graphic - Canada economic snapshot: tmsnrt.rs/2e8hNWV)

Additional reporting by Fergal Smith in Toronto, Editing by Dale Smith and Nick Zieminski

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