The Canadian economy grew by 0.1 per cent in July, Statistics Canada said on Thursday, Sept. 29 following a similar increase of 0.1 per cent in June.
The latest reading on real Gross Domestic Product (GDP) came in higher than expected, as previous estimates pointed to a contraction of 0.1 per cent.
Canada July GDP tops estimates up 0.1% m/m (a drop of 0.1% was forecast) despite big interest rate hikes at the BofC.— Mike Eppel (@eppman) September 29, 2022
-August flash-forecast shows unchanged GDP output.
The agency said a 0.5 per cent growth in goods-producing industries was “partially offset” by a 0.1 per cent drop in services-producing industries.
Mining, quarrying and oil and gas extraction sectors expanded 1.9 per cent in July, after slight declines in the previous two months. The economy also recorded a 3.2 per cent growth in agriculture, forestry, and fishing, which was driven by an increase in crop production. However, the manufacturing sector contracted 0.5 per cent in July, the third decline in four months.
As well, the agency said the retail and trade sector fell to its lowest level since December of 2021, contracting 1.9 per cent. Some of the largest declines were at gas stations, and food and beverage stores.
The hotel and food services industries contracted 1.0 per cent, the first decline since January. At that time, the drop as a result of the more transmissible COVID-19 Omicron variant.
Although annual inflation rate slowed to 7.0 per cent in August, CIBC senior economist Andrew Grantham told The Canadian Press contraction in the retail, accommodation and food sectors could mean that high inflation and interest rates are affecting consumers more widely.
The agency said the steep inflation and interest rate hikes are continuing to impact personal finance and real estate.
Statistics Canada said people put less money into savings accounts due to the higher cost of living. Meanwhile, the real estate and rental markets were mostly unchanged in July, following four consecutive monthly declines.
The agency also said based on preliminary information, the real gross domestic product (GDP) was “essentially unchanged in August.” An update will be provided in the next GDP report on Oct. 28.
Earlier this month, the Bank of Canada raised its key interest rate for the fifth time this year, and warned more hikes will be coming to lower inflation to its target of two per cent — the key rate currently sits at 3.25 per cent. The central bank is set to make its next rate announcement on Oct. 26.
With files from The Canadian Press.