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GDP report expected to show slow growth in August

Pipes that carry hot steam to well heads at Cenovus Energy's oil sands operation in Christina Lake, Alta., on June 12, 2013. The pace of economic growth in Canada is believed to have slowed as the summer wound down.

RICHARD PERRY/NYT

The pace of economic growth in Canada is believed to have slowed as the summer wound down.

What will be equally important when Statistics Canada reports on August gross domestic product Thursday is that we'll get a better sense of the "underlying economic trends" in the country.

Economists expect the report to show GDP growth of a modest 0.2 per cent in the month, down from July's 0.6 per cent, when, among other things, construction perked up along with the end of a major strike in Quebec's construction industry.

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"The increase is based on modest support from both goods and services, though industry data suggests that the former may be a touch softer," said economists at Toronto-Dominion Bank.

"Firm energy exports and a ramp up in production indicate that the natural resource/extraction sector will be a bright spot in this report even with a pullback in potash mining. After the sharp rebound in July following an end to the Quebec labour strike, construction output likely softened though a robust increase in hours worked suggests that the downside will be limited. "

Monthly GDP readings have been affected by temporary issues such as the strike and the widespread flooding in Alberta. But with no such events in August, the picture becomes clearer.

"With inclement weather and labour strikes no longer driving the economy's dynamics, August's GDP reading should finally give us a peek at underlying economic trends," said Emanuella Enenajor of CIBC World Markets.

"So it's hardly a surprise that the economy rose at a trend-like 0.2 per cent pace," she added in a research note.

"The important real estate category likely saw a month of healthy activity, with secondary market housing sales ramping up. Lending further support, August's gains in two-way real trade, with rising energy and metals exports offsetting weaker potash production."

Economists believe that, given how things are shaping up, the third quarter should see economic growth of 2 per cent to 2.3 per cent on an annualized basis.

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Last week, the Bank of Canada trimmed its economic projections as it abandoned a signal that the next move in interest rates would be up.

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