Finance and insurance sector boosts GDP in August: StatsCan

Growth in finance and insurance, as well as in oil and gas extraction, helped boost Canada’s economic expansion in August, despite declines in 12 out of 20 industrial sectors.

Real GDP edged up 0.1% for the month, representing the seventh consecutive monthly increase, reports Statistics Canada. Economists had expected a flat print.

The finance and insurance sector rose 1%—the largest monthly gain since May 2017—after a 0.4% decline in July. Increased activity in bond and equity markets helped drive growth in financial investment services, funds and other financial vehicles, says StatsCan.

The mining, quarrying, and oil and gas extraction sector rose 0.9%, offsetting declines in the previous two months.

In contrast, after two months of growth, manufacturing was down 0.6% in August, and construction was down 0.4% as new housing continued to slow. August’s construction activity reflects the largest decline in residential construction over a three-month period since the beginning of 2009, says StatsCan.

In a Wednesday report, CIBC chief economist Avery Shenfeld says, “Interest rate hikes, however mild they have been, alongside tighter mortgage regulations, seem to be turning construction into a net drag.”

Referring to the economy’s overall mixed results for the month, he said that “Canada’s economy had neither tricks nor treats.” August’s GDP was neither scary enough to create fears of a slump nor strong enough for the Bank of Canada to spook investors with a December rate hike, he said.

Shenfeld also noted that, over 12 months, real GDP has advanced 2.5%, while quarterly numbers likely put GDP close to 2%, barring upside surprises in Q3. That suggests the economy has “already slowed to its non-inflationary speed limit,” he said. The Bank of Canada puts the non-inflationary growth rate at 1.9%.

Shenfeld retains his forecast for the central bank’s next interest rate hike, which he expects in January. “Barring some big numbers for employment or core inflation, it will be hard to make the case for a December rate hike,” he said in the report.

Today’s data didn’t significantly affect the loonie or two-year bond yields, he added.

For full details, read the reports from StatsCan and CIBC.

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.