Canadian GDP in-line, now watching US developments - Nomura

Analysts at Nomura noted that the monthly GDP came in in line with consensus expectations at +0.2% m-o-m in August, following a revised increase of +0.4% m-o-m for the month of July. In terms of composition, goods-producing industries contributed the most to the change while service industries were largely unchanged.

Key Quotes:

The goods-producing side of the economy rose 0.7% m-o-m, led again primarily by mining, quarrying and oil and gas extraction (+1.4 % m-o-m) and utilities (+2.4% m-o-m). Agriculture and forestry was the only sub-category here that contributed negatively to overall growth (-0.5% m-o-m). The service sector was virtually flat (+0.0% m-o-m) in August, with 8 out of 15 components declining. The largest contributors to the decline were arts, entertainment and recreation (-0.6% m-o-m), retail trade (-0.2% m-o-m) and finance and insurance (- 0.2% m-o-m), while the strongest positive contributors were accommodation and food services (+0.4% m-o-m-), wholesale trade (+0.5% m-o-m) and transportation and warehousing (+0.4% m-o-m).

Overall, the report continues to confirm to us that the strength in recent months was driven by a normalisation in the oil sector following disruption from the wildfires. Excluding the mining and oil sectors of the economy, growth would have grown a modest +0.1% m-o-m. This continues to suggest that there is little underlying momentum in the economy. These numbers do not change our call on monetary policy, where we expect the BoC to stay on hold in the near future.

With monetary policy on hold, CAD will likely be driven mainly by oil prices and US rates in the medium term."