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Following an eight-month streak of increases, Canada’s real gross domestic product (GDP) was essentially flat in July, driven down by a decline in oil and gas extraction, Statistics Canada said on Friday.
The mining, quarrying, and oil and gas extraction sector contracted 1.2 percent in July, dragged down for the most part by a 1.8-percent drop in the oil and gas extraction industry.
Non-conventional oil extraction declined by 3.0 percent, for the fourth time in five months, Statistics Canada said. Conventional oil and gas extraction contracted for the first time in five months—by 0.8 percent—on the back of lower crude oil extraction.
Support activities for mining, oil and gas extraction declined for the third month in a row, this time by 1.2 percent, as support activities for oil and gas extraction contracted on lower drilling services.
The drop in mining, quarrying, and oil and gas extraction was the biggest decline by sector in July, leading to the flat real GDP—the decline offset by the biggest rise—of 2 percent—in the wholesale industry.
The flat GDP in July compares to expectations of analysts for a 0.1 percent growth.
“After a sprint in the first half of the year, Canadian GDP took a breather in July. The flat reading was a tick weaker than the consensus was looking for, although the miss was driven entirely by the sometimes-volatile oil and gas sector,” Nick Exarhos at CIBC World Markets said in a note.
“Oil and gas slipped (-1.2%) in July, but that’s small change compared to the growth in the sector we’ve seen in the past several months. In fact, annual output in the resource sector is tracking 13.2% through July, by far the hottest Canadian sector. Despite what’s been a collapse in energy sector cap-ex, the prior investment spree is continuing to bear fruit today in increased output. 2018 should see production volumes expand at a similar pace,” Exarhos noted.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.