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Canada’s gross domestic product was little changed in July as a drop in oil and gas production offset gains in manufacturing.

Output remained close to an annualized C$1.63 trillion ($1.46 trillion) in July following six monthly increases, Statistics Canada said today in Ottawa. The median forecast in a Bloomberg economist survey with 14 responses was for output to expand 0.3 percent.

The report supports Bank of Canada Governor Stephen Poloz, who said this month more time is needed to assess early recovery signs. Poloz held the central bank’s benchmark rate on overnight loans between commercial banks at 1 percent and said a recent jump in exports must be sustained before it triggers the business investment needed to bring the economy to full capacity over the next two years.

The report “is bit of a tough pill to swallow” after half a year of gains, said Mazen Issa, senior Canada macro strategist at TD Securities in Toronto. “I still wouldn’t want to discount the growth we have had this year,” said Issa, who predicts a third-quarter expansion of 2.5 percent at an annualized rate, enough to erode economic slack.

Canada’s dollar weakened 0.2 percent to C$1.1182 per U.S. dollar at 9:43 a.m. Toronto time, and has declined by 5 percent this year. Government bond yields rose, including the security due in two years, which climbed 1 basis point to 1.12 percent.

Oil and gas extraction fell by 1.6 percent in July, and “support activities” for energy production fell by 0.9 percent. Cooler-than-normal temperatures curbed the output of utilities by 2.3 percent, Statistics Canada said.

Postponing Work

Norway’s Statoil ASA said Sept. 25 it would postpone work on its Corner field project in the Canadian oil sands as mounting costs reduce the potential for profit, following a similar delay announced by Total SA in May. Statoil said it plans to push back the project in northern Alberta by at least three years and expects to cut 70 jobs.

The decision “is consistent with our stepwise approach to the oil sands,” Statoil Canada President Staale Tungesvik said in a statement.

Manufacturing rose by 1 percent in July led by durable goods such as transportation equipment, electronics and furniture, Statistics Canada said. Output was also boosted by a 0.5 percent gain in the public sector, led by education.

Other parts of the economy are showing mixed signs of slack. Job growth has slowed since the start of 2013 while inflation has quickened this year on gains in energy costs that the central bank says are temporary.

Needed Move

Canada’s economy is showing signs of making the needed move to broad-based growth including exports and business investment, said Stefane Marion, chief economist at Montreal-based National Bank of Canada.

“We are transitioning, but to better quality growth in my view” he said in New York at a Bloomberg Canadian Fixed Income Conference in New York today. Today’s report showed that manufacturing, one of the hardest-hit in the global recession, has gained 4.7 percent in the 12 months through July.

The Bank of Canada has frozen its key lending rate since September 2010, the longest pause since the 1950s. The central bank’s key interest rate will probably remain at 1 percent until the second half of next year according to economists surveyed by Bloomberg News.

In a separate report, Statistics Canada said the industrial product price index rose 0.2 percent in August, and the raw materials price index dropped 2.2 percent.

The median forecast of economists surveyed by Bloomberg was for industrial prices to fall 0.2 percent and the raw materials index to fall 1.5 percent.
Source: Bloomberg

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