The Bank of Canada building in Ottawa.BLAIR GABLE
Economists believe July's economic dip was temporary, though they still expect slow growth going forward. And some believe this morning's report from Statistics Canada will add to the forces arguing against another hike in interest rates in October. The economy contracted by 0.1 per cent in July, ending 11 months of growth and pushed down by hits to manufacturing, forestry and real estate. The reading wasn't a surprise to anyone but, as BMO Nesbitt Burns economist Michael Gregory put it, "that doesn't make it feel any better." Here are the views of three economists:
"The decline was likely temporary in nature. In particular, retail sales in July suffered a heavy blow from the introduction of the HST in Ontario and B.C., and once consumers shake off the initial shock, growth should continue … That being said we continue to look for disappointing Canadian economic growth (but positive) through the rest of this year, and into 2011. We believe that a highly indebted household and a weakening outlook in the U.S. will mean that the Canadian economy will continue to face economic headwinds both on the international and domestic front." Diana Petramala, Toronto-Dominion Bank
"The Canadian economy has lost much of its forward momentum, reflecting sluggish U.S. demand and payback for having home renovation activity and home sales pulled forward earlier in the year, along with the lingering legacy of a lofty loonie … The Bank of Canada will probably pause on Oct. 19." Michael Gregory, BMO Nesbitt Burns
"After an initial boost, the recovery seems to have lost steam in recent months with Canada growing at only 0.7 per cent annualized over the April-July period, a snail's pace by any measure … And with inflation also tracking well below the [Bank of Canada's]estimates, an October rate hike is looking more and more improbable." Krishen Rangasamy, CIBC World Markets.