The Canadian economy revved up at the end of the summer, buoyed by record activity in the energy sector.
Gross domestic product expanded at a faster-than-expected pace in August, tallying monthly growth of 0.3 per cent, Statistics Canada said Thursday.
Oil and gas activity wasn’t the only source of gains, as much of the services side of the economy also grew.
It is the first clear reading in months after special factors including the Alberta flood and Quebec construction strike caused activity to see-saw in June and July.
Output has broadly been weaker than expected in the past half year, prompting the Bank of Canada to cut its growth forecast and remove references to interest-rate hikes last week.
“While this is certainly a welcome surprise, the Bank of Canada will need to see continued momentum before changing policy tack,” Benjamin Reitzes, senior economist at BMO Nesbitt Burns, said in a note.
August’s report prompted several economists to revise their forecasts higher for third-quarter economic growth, which now also looks to be stronger than the central bank’s revised call.
Arlene Kish, senior principal economist at IHS Global Insight, now pegs third-quarter growth at closer to 2.5 per cent, up from an earlier forecast of 2 per cent.
That said, lingering concern about the U.S. debt ceiling and its impact on confidence “ramp up the uncertainty in determining the Canadian economic outlook for fourth quarter,” Ms. Kish said.
Activity in August was fuelled by record output in oil and gas extraction, along with services such as accommodation.
Output in the oil and gas sector grew 2.8 per cent in August, with “notable” increase in oil production along with higher natural gas extraction, Statscan said.
Activities that support the energy sector also expanded, logging growth of 2.8 per cent as drilling and rigging services ramped up. The agriculture and forestry sector also grew.
By contrast, the mining sector contracted 1.1 per cent with declines in potash and metallic mineral mining. Manufacturing output fell 0.3 per cent.
All told, the goods-producing side of the economy grew 0.4 per cent in the month and the services side expanded 0.3 per cent.
Among services, gains were widespread – in accommodation and food services, wholesale and retail trade and professional services along with transportation and warehousing services.
A separate report out Thursday points to tepid growth. Average weekly earnings were up 1.3 per cent in August from a year earlier, the same pace as in the prior month. Hours worked fell to 32.9 hours per week, down from month and year-earlier levels, Statscan’s payrolls report showed.
Economists had expected 0.1 per cent monthly GDP in August and 1.7 per cent annualized growth.