Canadian economy rebounds thanks to growth in hotel sector
OTTAWA, October 1 (Reuters) – The Canadian economy likely rebounded in August after a slight contraction in July, driven by growth in the hotel industry, although a withering drought continues to weigh on the important agricultural sector, according to data released Friday.
The Canadian economy contracted 0.1% in July, narrowly beating analysts’ estimates of a 0.2% decline, but likely increased 0.7% in August thanks to increases in services and manufacturing, according to Statistics Canada. The August number is a preliminary estimate.
With the expected rise in August, total economic activity is about 1% lower than pre-pandemic levels, Statscan said.
“The slightly smaller-than-expected decline in July and the nice pop in August suggest that the economy was able to generate moderate growth in the summer quarter as a whole,” said Doug Porter, chief economist at BMO Capital markets, in a note. .
July’s drop came as a heat wave hit the agriculture sector and manufacturers were dragged down by supply chain issues, while construction declined for the third consecutive month.
This was partially offset by strong momentum in services, as easing public health measures continued to boost a rebound in hospitality and tourism, Statscan said.
This force in the services is expected to last through August and beyond, even as a fourth wave of COVID-19 infections weighs on the prairie provinces of Alberta and Saskatchewan.
Analysts said the Bank of Canada will likely cut rates again in its October 27 rate decision, although August’s gain is unlikely to be enough to move the central bank’s lines on rates. interest, especially after a disappointing contraction in the second trimester.
“We think the likelihood that (the Bank of Canada) will soon follow other global central banks in taking a hawkish turn is low,” Stephen Brown, senior Canadian economist at Capital Economics, said in a note.
The Canadian dollar was virtually unchanged at 1.2675 for the greenback, or 78.90 US cents.
Reporting by Julie Gordon in Ottawa; Editing by Timothy Heritage, Giles Elgood and Mark Porter
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