OTTAWA – The Canadian economy grew for the third consecutive month in August, but the pace of growth slowed from earlier in the summer, Statistics Canada said Friday.
The economy crept ahead by 0.1 per cent in August, matching the expectations of economists surveyed by Thomson Reuters.
However, the increase was smaller than the 0.4 per cent addition in June and 0.3 per cent growth in July.
“Canada’s economy may have snapped back into action in the third quarter, but clouds remain over the outlook,” said TD Bank economist Leslie Preston.
“The persistent low level of oil prices means that capital spending in the oilpatch is likely to decline again in 2016. That is a key headwind to growth in the overall economy, which we expect to remain quite modest over the medium term.”
The three months of increases followed five months of contraction in the Canadian economy to start the year.
Economists suggested the August figure puts the third quarter on track for growth at an annual pace of about 2.5 per cent, in line with estimates by the Bank of Canada.
The central bank has cut its key interest rate twice this year in an effort to boost the economy, which was hit hard by a drop in the price of oil last year.
Although growth in August said was slower than in June and July, Scotiabank economist Derek Holt noted that those months were boosted by a number of one-time events, including an auto plant returning to full production and the end of some problems in the oil sector.
“What we’re seeing now in August is a bit of moderation from that temporary influence, but it is all about the trend more than the individual month,” Holt said.
For its part, Statistics Canada said the increase in June was largely attributable to the FIFA Women’s Soccer World Cup held in Canada while July and August were helped by other sporting events, including the Pan-American Games in Toronto.
The growth in August was mainly a result of gains in retail trade, manufacturing, mining, quarrying and oil and gas extraction.
Retail trade rose 0.6 per cent for August, while both the manufacturing and the mining, quarrying and oil and gas extraction sectors each grew by 0.4 per cent.
Holt said that while oil prices may be down, production remains strong, and manufacturers are benefiting from the lower Canadian dollar.
“We continue to increase energy output as a large number of big projects came online for the first time following the surge in capital spending into last year,” he said.
The arts and entertainment sector decreased 0.9 per cent in August, following a 6.9 per gain in June and a 2.0 per cent decline in July.
The finance and insurance sector fell 0.2 per cent in August.
The economic report came as the federal government reported a $2.3-billion deficit for August compared with a $300-million deficit last year.
The shortfall for the month cut the surplus for the April-to-August fiscal year to date by nearly half to $2.8 billion. That compared with a deficit of $1.1 billion for the same five-month period last year.
The spring federal budget forecast a surplus of $1.4 billion for the full fiscal year. However the economy has grown at a slower pace than expected, raising concerns Ottawa will fall short of that mark.