Canada’s economic recovery from the effects of COVID-19 is starting to slow.
GDP rose 1.2 per cent month over month in August, according to Statistics Canada, driven largely by the hard hit service sectors.
Accommodation and food services rose 7.3 per cent, 5.6 per cent for food services and drinking places. That is however slower than the three straight months of double digit increases prior.
This follows an increase of 3.1 per cent in July and leaves the economy 5 per cent off of its overall pre-pandemic level in February.
“While some may see the August result as ‘a big slowdown’ from earlier jumps, note that, prior to this year, a 1.2% monthly rise would have been the second largest increase in the past 20 years,” said Doug Porter, chief economist at BMO.
The arts, entertainment and recreation sector grew 13.7 per cent driven largely by the reopening of amusement parks, casinos, and other establishments in parts of the country.
Growth is expected to slow further in September with an early estimate of 0.7 per cent growth in September, which would imply an around 47 per cent annualised growth rate for September.
“The restrictions imposed this month on various customer-facing services will weigh on GDP in the fourth quarter, but we think other forecasters are overestimating their effects,” said Stephen Brown, senior Canada economist at Capital Economics.
“For the Bank of Canada’s new forecast for fourth-quarter growth of just 1% annualised to prove correct, month-on-month growth would have to an average of minus 0.3% m/m in October, November and December.”
The loonie didn’t react to the news in the moments after the release.
“Currency markets shrugged off the positive GDP release as all eyes are on the pandemic front or, more importantly, the upcoming U.S. presidential election,” said Steve Kulchyk, senior corporate dealer at Moneycorp International Payments Canada.
“Volatility is expected to be high heading into Tuesday night and markets could be in for a bumpy ride if the election is contested, which seems like a likely scenario.”
Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains.