Canadian GDP growth likely to have declined in July

Canada’s industry-level GDP data is set to be released tomorrow. According to a TD Economics research report, the GDP growth is likely to have declined modestly by 0.1 percent in July on softness in the energy sector after power outages curtailed output from a large producer in the oil sands. The drop in energy output would leave services to drive growth while manufacturing and utilities give a modest offset.

A nation-wide heat wave might give an important tailwind to the latter, though it also looms residential construction due to unfavourable working conditions. Softness in the energy sector should be transitory, and output in the oil sands is expected to bounce back in the months again.

Moreover, the Bank of Canada is likely to look through such distortions ahead of the October meeting. The July’s MPR Q3 forecasts of 1.5 percent shows that they have already pencilled in some downside for July and Senior Deputy Governor Wilkins recently stated that she expects growth to average 2 percent in the second half, suggesting a recovery in the fourth quarter, stated TD Economics.

At 19:00 GMT the FxWirePro's Hourly Strength Index of Canadian Dollar was highly bearish at -116.056, while the FxWirePro's Hourly Strength Index of US Dollar was highly bullish at 155.112. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex