Canada’s economy grew by an expected 0.2 per cent in August, as the energy sector rebounded after devastating wildfires in Alberta.
That marked the third consecutive month that natural resources expanded, because of more oil extraction and a surprise jump in potash mining, according to Statistics Canada’s gross domestic product report released on Tuesday.
But the 0.9-per-cent bump in oil and gas output showed the energy sector returning to levels seen before the fires forced companies to briefly halt oil sands production in northern Alberta. And the surge in potash may have been temporary, given the glut of fertilizer in the market and consolidation in the industry.
Excluding the revival in oil and potash, economic growth would have been 0.1 per cent in August.
“The report continues to confirm to us that the strength in recent months was driven by a normalization in the oil sector following disruption from the wildfires,” Charles St-Arnaud of Nomura Securities said in a note. “This continues to suggest that there is little underlying momentum in the economy.”
Statistics Canada trimmed July’s economic growth to 0.4 per cent from 0.5 per cent, a level that still points to a robust third quarter. But that comes after a dismal second quarter, when Canada’s economy shrank because of Alberta’s woes.
“It’s been a great quarter, but not a good year,” Avery Shenfeld, chief economist with Canadian Imperial Bank of Commerce, said in a note. “Lest we forget, all of this was mostly a make-up from a negative quarter in Q2 that was sharply dented by an Alberta fire.”
Goods-producing industries increased 0.7 per cent in August, while manufacturing output rose 0.3 per cent. Utilities grew by 2.4 per cent, as heat waves in Eastern Canada pumped up demand for air conditioning. Construction rose 0.5 per cent, mostly because of more residential building, repairs and renovations.
On the downside, the finance and insurance sectors fell by 0.2 per cent, the first decline since last November. The real estate sector was flat, marking the slowest activity since January, 2014.
British Columbia’s new tax on foreign buyers of real estate, which went into effect in August, led to a 3.2-per-cent drop in realtor and broker activity.
Douglas Porter, chief economist with Bank of Montreal, said it was important to note that sales were juiced in the lead-up to the new tax. “We can only properly measure its impact over a number of months,” he said.
Another set of reforms to cool the hottest housing markets across the country are also expected to whack real estate services. Stricter mortgage insurance rules were rolled out in October and make it harder for the riskiest borrowers to qualify for a mortgage.
“Those sectors will be under renewed pressure in the last quarter of the year as new tighter mortgage rules are implemented,” Krishen Rangasamy, senior economist with National Bank Financial, said in a note.Report Typo/Error