MNI 5 THINGS: Energy Seen Dragging Canadian Growth in July

--5 Things To Look For In Canada July GDP

By Yali N'Diaye

     OTTAWA (MNI) - Statistics Canada will release the July GDP data Friday

morning. Ahead of the release, we highlight five themes for particular

attention:    

     - Analysts in a MNI survey expect July GDP to edge up 0.1%. Forecasts range

from -0.1% to +0.2%, with the extent of the oil production drag being the wild

card. GDP was flat in June, handing off a soft start to the third quarter

following a 0.5% growth expansion in May. A 0.5% gain in hours worked during the

month still points to a positive reading.

     - The oil sector was affected by a power outage in June at Syncrude

Canada's oil sands, but Suncor Energy said the facility was not expected to

return to full production until September. The extent of the impact of this

disruption will likely determine the pace of GDP growth in July. However, the

BOC has already signaled that the disruption in the oil sector was a temporary

factor it is likely to look through. Such factors "will likely weigh on growth

in the third quarter, but do not point to weaker underlying momentum," BOC

Senior Deputy Governor Carolyn Wilkins said in her economic progress report

speech on Sept. 6. Therefore, it will be particularly important to look at GDP

excluding energy on Friday.

     - Housing will have a mixed contribution in July based on monthly data.

July marked the third consecutive increase in existing home sales (+3.0%),

supporting the scenario of a stabilization after a weak start to 2018. On the

other hand, housing starts fell to a seasonally adjusted annual rate of 205,751

in July from 245,169 in June, a 16.1% drop pointing to weaker construction

activity. During the month, construction employment fell: by 2,200 according to

the payrolls survey and by 12,300 according to the household survey.

     - Manufacturing is expected to provide a strong offset to the expected

weakness in the energy sector, as sales volumes rose 1.0% on the month despite

the tariffs imposed both by Canada and the U.S. on their respective imports of

aluminum and steel.

     - With construction likely down, and manufacturing offsetting energy to an

unknown extent, that leaves the services sector with the heavy lifting to do in

July. A 1.2% increase in real wholesale sales is likely to provide support,

while retail sales volumes edged down 0.1%. 

--MNI Ottawa Bureau; +1 613 869-0916; email: yali.ndiaye@marketnews.com

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