Canada’s economy experienced modest growth in July 2024, with the real gross domestic product (GDP) increasing by 0.2%. This slight rise follows a stagnant June, as the economy grappled with the adverse effects of wildfires on several key industries. Despite the challenges, sectors such as retail trade, finance, and public administration contributed to the overall growth, highlighting the resilience of certain areas of the economy amidst ongoing disruptions.
The retail trade sector was a notable contributor to July’s economic uptick, posting a robust 1.0% increase—its largest monthly gain since January 2023. The growth was propelled by a 2.8% surge in motor vehicles and parts dealers, with new car dealerships leading the charge. The increased retail activity in this sub-sector effectively neutralized the 1.8% decline at gasoline stations, which struggled amidst fluctuating fuel prices and shifting consumer behaviors.
Motor vehicles and parts dealers have shown resilience, bouncing back from earlier challenges, including supply chain disruptions and fluctuating consumer demand. Their performance in July highlights a renewed consumer interest in automotive purchases, possibly driven by competitive pricing and a gradual stabilization in the supply of new vehicles.
The public sector, encompassing educational services, healthcare and social assistance, and public administration, continued its steady climb, marking its seventh consecutive month of growth with a 0.3% increase in July.
Public administration, particularly at local, municipal, and regional levels, was the primary driver within the public sector, growing by 0.4%. The growth reflects continued investments in public infrastructure and services, as well as efforts to support local governments in addressing community needs amidst broader economic challenges. Educational services and healthcare and social assistance also contributed to the sector’s growth, each recording a 0.2% increase, indicative of sustained demand for educational programs and healthcare services across the country.
The finance and insurance sector continued its upward trajectory, growing by 0.5% in July, buoyed by broad-based strength across the industry. Financial investment services, funds, and other financial vehicles were particularly strong, posting a 1.8% increase.
The sector’s performance was further bolstered by increased activity in banking and credit services, which saw a 0.3% rise. Both mortgage and non-mortgage debt grew in July, suggesting that consumers and businesses alike are continuing to engage in borrowing, albeit cautiously, amidst ongoing economic uncertainty.
The utilities sector expanded for the third consecutive month, growing by 1.3% in July. The growth was driven primarily by a 1.0% increase in the electric power generation, transmission, and distribution industry, which saw heightened demand due to warmer-than-usual weather in Western Canada. The hot summer temperatures led to increased use of electricity for cooling, further boosting the sector’s performance. Natural gas distribution also experienced a significant rise of 3.9%, largely driven by industrial demand, reflecting the ongoing recovery in industrial activities across the country.
In contrast, the manufacturing sector showed a more modest recovery, with a 0.3% increase in July, partially offsetting the previous month’s decline. Non-durable goods manufacturing was the primary contributor, growing by 1.3%, with the chemical manufacturing subsector leading the way. The subsector posted a 4.1% increase, largely driven by pharmaceutical and medicine products, which saw higher exports in July. The food manufacturing industry also rebounded, growing by 1.2%, with record-high canola crushing contributing significantly to the sector’s performance.
Wildfires that swept through various parts of Canada in July had a profound impact on several key industries, particularly transportation and warehousing, which contracted by 0.4% for the second consecutive month. The fires led to significant disruptions in rail transportation, resulting in a 4.6% decline in this subsector. The suspension of rail traffic affected the movement of goods to and from major ports in Western Canada, disrupting supply chains and causing delays in freight and commuter services.
The wildfires also took a toll on the accommodation services industry, which saw a 2.0% decline in July. Tourist destinations in Western Canada, which typically see a surge in visitors during the summer, were severely impacted as fires led to the closure of recreational vehicle (RV) parks, camps, and other tourist accommodations. The widespread smoke and outdoor fire bans not only curtailed outdoor activities but also deterred tourists, leading to a significant drop in occupancy rates and overall revenue for the industry.
The construction sector, which has been struggling in recent months, continued its downward trajectory with a 0.4% contraction in July. This marks the sector’s third decline in four months, with non-residential building construction being the hardest hit. The subsector recorded a 1.7% decline, driven by decreases in industrial and commercial building projects. The slowdown in construction reflects ongoing economic uncertainty, particularly in securing financing for large-scale projects, as well as challenges related to rising material costs and labor shortages.
While July’s GDP figures indicate modest growth, the Canadian economy faces significant challenges as it navigates through the remainder of the year. The resilience of key sectors such as retail trade, finance, and the public sector has provided some stability, but the ongoing disruptions caused by wildfires and the persistent struggles in the construction sector highlight the fragility of the recovery.
As Canada heads into the fall, the economy’s performance will likely depend on how these challenges are managed and whether growth can be sustained across a broader range of industries. The advance estimate for August suggests that the economy may face further stagnation, with gains in some sectors potentially offset by losses in others.