MNI REALITY CHECK: Canada GDP Slows on 2nd Wave, Trade Tension

Canada's GDP growth is seen slowing for a second month in August from the burst of spending after the spring Covid lockdown, with future obstacles including a second wave of the virus and trade tensions following next week's U.S. election, industry sources told MNI.

Output will gain 0.9% according to economists surveyed by MNI, which in normal times would be an outstanding month but today is a big slowdown from gains of 3% in July and 6.5% in June. Retail sales and housing are seen as drivers of growth, while a slowdown in the auto industry hurts manufacturing and wholesales.

Recent headlines about new restrictions will likely again hurt the hospitality industry and other close-contact services, putting more pressure on firms to hold back investment.

Key notes from industry leaders ahead of the report due Friday at 8:30 ET:

Keith Currie, President, Ontario Federation of Agriculture:

The pandemic hurt sales of dairy and meat sold in bulk to restaurants and hotels, because many producers couldn't suddenly adjust their packaging as more people ate at home. Other sectors like corn, soybeans and wheat fared better because those products can be stored and processed later.

Investment in new equipment has stalled because farmers don't know where consumer buying habits are going to be in the future.

"As a large agricultural producing country, we are always concerned how the pandemic affects our access to the other countries," he said. "The U.S. is one of our biggest business partners and we want to make sure that we maintain that flow of products."

"In summer, the weather was good, farmers in the west and in Ontario had a good growing and harvest season," he said.

John Bayko, VP Communications, Canadian Association of Oil Well Drilling Contractors:

Falling prices earlier this year was a bigger story than supply since rigs are often in remote locations and deemed essential operations, he said. Prices have recovered some recently, Bayko said.

"The general increase in the price of oil helped this industry, and we have seen steady activity since about July, but still below the level that we were in that last year."

The pandemic added to a long downturn that saw employment drop 20-50%, he said. "We haven't had substantial cash flows in our industry for many years, so there has not been any capital investment for new equipment for quite some time and would not anticipate any changes until we had at least 4-5 quarters of sustained increased activity."

The Trans Mountain and Coastal pipeline projects will expand capacity and hopefully come along with better prices as the economy recovers, he said. The U.S. election next week may also shift the government's attitude on the energy industry, he said.

Jeff Guignard, Executive Director of Alliance of Beverage Licensees B.C.:

The pandemic led to a major shift with sales at bars and restaurants plunging while sales at retail stores jumped 30-40%.

"As people spend more time at home instead of going out, they are purchasing in larger formats, and you see an increase in premium" brand purchases, he said.

The main challenge is the industry uncertainty around more shutdowns in hospitality.