REAL ECONOMY BLOG | September 29, 2023

Canada’s gross domestic product in July remained unchanged, adding to the prospect that the economy can achieve a soft landing and avoid a recession.

The data released by Statistics Canada on Friday offered a picture of an economy holding its own even as it cools. Services-producing industries grew by 0.1% and goods-producing industries contracted by 0.3% compared to June, according to the data.

Labour strikes have been occurring across industries this year, and month after month they have put a dent in the economy. The British Columbia port strikes were no exception, dampening multiple sectors from manufacturing to transportation, and they were responsible for the lack of growth in July.

Manufacturing had the biggest contraction among all sectors, falling by 1.5% because of lower inventories and the port strikes.

Canada is not immune to global economic turmoil. China’s slowdown resulted in a decline in trade, most notably in imports from China. Together with the strikes, this decline led to a 3.4% contraction in warehouse transportation.

The impact of the worst wildfire season on record was apparent as well. Air transportation declined by 2.1% as bad weather led to delays and cancellations. Canadian airlines canceled the most flights in July since the pandemic.

The energy sector increased, with oil and gas extraction expanding by 2.4% and oil sand growing by 0.8%, while pipeline transportation fell by 1.2% and petroleum refineries declined by 1.9%.

As oil prices rise, the energy boom is expected to continue.

July’s GDP data and August’s advance estimate reveal that Canada is on track to a third quarter of weak growth. But weak growth is growth, and the economy is proving resilient.

Friday’s data is in line with the Bank of Canada’s goal of cooling the economy and is a signal to the central bank that no further rate hikes are needed.

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