MNI REALITY CHECK: Canada July GDP Rebound Seen Slowing to 3%

Canada's GDP growth will slow by half to 3% in July as the burst of spending after the Covid lockdown wears off, with industrial companies and home realtors saying the risk of a second wave will keep investment and consumer demand in doubt.

The MNI economist median follows the 6.5% burst in June, supported by gains in manufacturing, wholesale and housing. With the even steeper drop of 11.7% in April at the height of the lockdown, total output will still be below pre-pandemic levels even with the expected gain.

Key points from industry leaders ahead of Wednesday's report, due at 8:30 am from Ottawa:

• The surge in lumber prices during a housing boom is expected to fade as production ramps up again.
• Housing markets are tight with supply at the lowest in more than a decade and buyers returning to Open Houses, but that may not last with Ontario and Quebec tightening rules on gatherings again.
• A second Covid wave could drive down oil and gas production and investment yet gain, and even a best-case scenario will hold back capital projects for at least a year.

JOEL NEUHEIMER, VP, FOREST PRODUCTS ASSOCIATION OF CANADA

• The forestry industry, which was recovering from the transportation challenges before Covid, is facing a rebound mainly on lumber and toilet paper demand surge that started in May.
• Homebuilding and renovations in Canada and the U.S. during the summer pushed up lumber prices, while paper suffers from office and school closures.
• "We are not seeing as much re-investment in this industry as we would like to see," he said, blaming government regulations.

SHAUN CATHCART, ECONOMIST, CANADIAN REAL ESTATE ASSOCIATION

• "Sales activities in June returned to the pre-COVID level pretty quickly, July was the highest monthly level for Canadian home sales ever, and some of it is because of the activities that don't happen in spring."
• The MLS home price index grew in July and August, at the second highest pace in 15 years.
• "In case where we have a second wave, you can see things slow down again, but the data shows that certainly, the market is not going down too much in September."

BEN BRUNNEN, VP, CANADIAN ASSOCIATION OF PETROLEUM PRODUCERS

• "COVID has a significant impact on upstream industry in Canada, we have seen 800,000 barrels per day removed from the market as a result of COVID, and we don't expect it to come back at least mid 2021."
• Companies are cutting investment this year and likely lack the confidence to spend money for next year either.
• A second wave would likely cause another massive drop in production and investment on the order of the first wave.