GDP stalls in July vs. 0.1% expansion expected

• Canadian economy stalled in July after a 0.2% contraction in June. 
• USD/CAD stays around 1.3425 after the data.

Canada’s real Gross Domestic Product (GDP) “was essentially unchanged in July, following a 0.2% decline in June”, Statistics Canada reported on Friday. This reading came in worse than the market expectation for an expansion of 0.1%.

The reports added that “certain sectors impacted by wildfires in June bounce back in July” and highlighted that manufacturing declined for a second consecutive month.

The advance estimate for real GDP for August 2023 indicates that real GDP edged up 0.1% in August. The following GDP report will be released on October 31. 

Key takeaways from the report: 

Services-producing industries edged up 0.1% in the month, while goods-producing industries contracted 0.3%. Overall, 9 of 20 industrial sectors posted increases.

The manufacturing sector (-1.5%) had the largest negative contribution in July, its largest since April 2021. This was the second consecutive monthly contraction for the sector. The July 2023 decline largely stems from lower inventory formation.

Advance information indicates that real GDP edged up 0.1% in August. Increases in the wholesale trade and finance and insurance sectors were partly offset by decreases in the retail trade and oil and gas extraction sectors.

Market reaction

The USD/CAD remained in negative territory around 1.3430. At the same time, the US reported the Core Personal Consumption Expenditure Price Index.