Canada's economy edges up in July

[abc]

Canada's economy edges up in July

BY GORDON ISFELD, FINANCIAL POST SEPTEMBER 30, 2011

The Canadian economy made progress in July, offering signs of hope for
the future.

OTTAWA — The Canadian economy continued to nudge ahead in July, led by
manufacturing and wholesale trade, pointing to a possible third-quarter
bounce back after shrinking in the previous three-month period.

Gross domestic product — the broadest measure of economic activity — grew
0.3 per cent during the month, following a 0.2 increase in June,
Statistics Canada said Friday.

"Manufacturing and, to a lesser extent, wholesale trade and
transportation services were the main sources of growth," the federal
agency said, while declines in sectors such as retail trade, mining and
oil and gas extraction held overall gains in check.

The 0.3 per cent advance in July's GDP was in line with economists'
forecasts.

"This report pre-dates the deepening financial market turbulence and will
likely show 'what could have been' for the economy, with the U.S. debt
limit non-sense and the euro debt crisis," Douglas Porter, deputy chief
economist at BMO Capital Markets, said in a note.

Porter said the economy is still on track to grow at about a two per cent
annual rate in Q3, adding that would also leave GDP up 2.2 per cent
year-over-year "precisely what we expect growth to average for all of
2011."

Last week, the International Monetary Fund downgraded its outlook for
Canada's economic growth to 2.1 per cent this year and 1.9 per cent next,
from its April estimates of 2.90 per cent and 2.6 per cent, respectively.

The Bank of Canada — which has kept its benchmark lending rate at a
near-record low of one per cent for more than a year — expects a return
to growth in the second half of this year, after the economy contracted
0.4 per cent in the second quarter.

Emanuella Enenajor, at CIBC World Markets, said July's GDP report showed
"a healthy gain — although recent indicators suggest some potential
deceleration in the following months."

Economists at Scotia Capital said in a note that "in order to get a flat
quarter with no growth, the economy would have to contract by 0.3 per
cent on average in August and September."

"While that's not in our print forecast, it's definitely not outside of
the realm of possibilities," said Scotia's Derek Holt and Karen Cordes
Woods. "Given that one-off shocks dissipated into July and temporarily
lifted GDP in some sectors, those same sectors will pose high base
effects off of which continued growth into August will be difficult to
achieve."

Statistics Canada said manufacturing rose 1.4 per cent in July, following
three straight monthly declines. Gains came in vehicle and auto-parts
sectors, as well as fabricated metals, machinery and chemical products.
Meanwhile, food, furniture and related products declined.

Wholesale trade rose 1.5 per cent during the month, with the biggest gain
recorded in sales of vehicles and auto-part, and personal and household
goods, and machinery and equipment.

Retail trade, however, fell 0.7 per cent, with vehicle and auto-parts
dealers among the hardest hit. Excluding those sectors, retail trade was
unchanged in July, the agency said.