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A GM worker uses human assistance automation to weld vehicle doors at a plant in Oshawa, Ont., on March 19.Nathan Denette/The Canadian Press

Statistics Canada said Friday the economy shrank 0.1 per cent in July, following a 0.6-per-cent rise in June.

The agency’s initial estimate for July real gross domestic product had been for a contraction of 0.4 per cent despite an easing of public health restrictions.

While the majority of sectors the agency tracks grew in July, declines in sectors such as agriculture and manufacturing more than offset any gains.

Crop production, except cannabis, was at it lowest level since November, 2007 on the back of drought conditions that Statistics Canada said hurt production of wheat, canola and other grains.

Manufacturing was down 1.1 per cent in July, while the construction sector fell by 0.9 per cent, which the agency said was driven by a third straight month of declines in residential building activity after reaching a record high in April.

Statistics Canada said total economic activity in July was about 2 per cent below pre-pandemic levels recorded in February, 2020.

The agency’s initial estimate for August suggests a rise of 0.7 per cent for the month, which would put total economic activity about 1 per cent below pre-pandemic levels. The August GDP figure will be finalized at the end of the month.

CIBC senior economist Royce Mendes said the figures for both months were largely in line with expectations, but other figures released by Statistics Canada on Friday suggest GDP is tracking below forecasts for the quarter.

Leading the gains in July was the beleaguered accommodation and food services sector, which has felt the brunt of public health measures restricting in-person services and travel.

Statistics Canada said a combination of summer weather, expanded patio capacity and loosened public health restrictions on indoor and outdoor dining across the country helped fuel a 12.5-per-cent gain in the sector, marking the second straight month of double-digit growth.

Air transportation rose 67.7 per cent in the July travel season after fully vaccinated visitors were no longer required to quarantine as of July 5.

Still, each sector is still well below where it was just before the pandemic struck.

Statistics Canada said the accommodations and food services sector in July was 21.3-per-cent below February, 2020 levels, while air transportation was nearly 83-per-cent below pre-pandemic levels.

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