The Canadian economy was unexpectedly flat in July, a reading that throws into question the strength of the country's recovery.
Gross domestic product didn't budge in the month, Statistics Canada said Wednesday, dashing economists' expectations of a 0.5-per-cent increase.
The following are comments from economists after the surprise flat reading of Canadian economic activity:
Okay, this is a shocker ... It's not just the consensus that will be surprised by this result - the Bank of Canada has been loudly proclaiming lately that growth would likely surprise to the high side of their July forecast in the second half of the year. However, with flat GDP in July, that even puts 1 per cent growth in [the third quarter]at risk (the BOC was initially looking for 1.3 per cent), unless we get a neat reversal of this weakness in August. Given the broad-based softness here ... don't count on it. Douglas Porter, deputy chief economist, BMO Nesbitt Burns
We believe that the Canadian economy exited the recession in [the second quarter] given the strong labour market performance in August, and is in recovery. But, given the very disappointing July GDP report, that economic recovery may not be as strong as expected as we believe that the initial phases of this recovery will likely be tepid, and driven in large part by the substantial monetary and fiscal stimulus that has been added to the economy. Millan Mulraine, economics strategist, TD Securities
Like a long unused engine, Canada's economy is sputtering as it's warming up. While the recession may well have ended in June with the first increase in output in eleven months, July's GDP was flat, falling miles below consensus expectations, including our own. Where earlier reports signaled growth, as was the case in manufacturing and wholesaling, gains were indeed registered in real output. But what we didn't know hurt us, as sectors where other information was limited ahead of this release showed steep declines, and areas of expected weakness, including mining and utilities, were hit by even larger drops than anticipated. Overall, that will prompt downward revisions in [third-quarter]growth forecasts. Avery Shenfeld, chief economist, CIBC World Markets
July's data on Canadian GDP are certainly disappointing with activity being flat during the month. That said, disappointment is due to temporary factors. Weakness was concentrated in utilities which was affected by lower than average temperatures in July, and weak demand conditions in the mining, oil and gas extraction sector (-1.5%) resulted in the temporary closure of facilities. On the other hand, the manufacturing sector registered its first rebound since the start of the recession (output of motor vehicles and parts increased 17%) and positive growth was observed within services. The July GDP numbers suggest that[the third quarter]will not be as strong as initially assumed but the expected rebound in activity is only delayed by one month. Assuming a rebound in activity in August and a decent gain in September, real GDP growth should be slightly above 2% in [the third quarter] That said, the growth dynamic set the stage for a stronger recovery in [the fourth quarter] which is already corroborated by the significant rebound of the Canadian leading economic indicator, up 4% in the last three months. Yanick Desnoyers, assistant chief economist, National Bank
It's much weaker than expected because we were thinkingthe global recovery would really benefitCanada. But we're realizing that was true for very few sectors. Manufacturing was up ... but that's basically it. The rest is not advancing. There's no spark in our economy and the recovery is very timid at this point. The numbers on the goods[producing]side are very disappointing, if not depressing. Sébastien Lavoie, economist, Laurentian Bank Securities