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The energy sector recovery boosted the Canadian economy in May, giving the nation the fastest level of growth since October 2000, according to a new report by The Canadian Press.
Statistics Canada had predicted a jump in real gross domestic product by 0.2 percent in May, but the economy grew by 0.6 percent instead. The high growth rate ups the chances that the Bank of Canada will increase interest rates in September.
The Bank of Canada increased the principal interest rate to 0.75 percent earlier this month. The jump represented the first such move since 2010, just a couple of years after the global economic recession.
“While that very impressive headline comes with a caveat — last May was depressed by the Alberta wildfires — even excluding that factor leaves the underlying growth trend well above three per cent,” Doug Porter, economist for Bank of Montreal, wrote in a note to clients this week, referring to the annual GDP growth rate.
“While the blowout headline advance no doubt exaggerates the underlying strength in growth, the fact is that every single major surprise for the economy this year has been to the upside,” Porter added.
The drilling recovery in Canada can be traced by the Baker Hughes rig count, which has had the Canadian count increasing by double digit numbers in recent weeks. The country added 15 oil and gas rigs last week and added another 14 rigs this week. Of the 14 new active rigs this week in Canada, 11 were oil rigs. Oil rigs in Canada now stand at 129, up 60 on the year.
Earlier this month, wildfires threatened the Kinder Morgan Trans Mountain pipeline in British Columbia, prompting the company to take “precautionary measures” to protect the infrastructure project. The fire has already affected mining and forestry operations in the area.
By Zainab Calcuttawala for Oilprice.com
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Zainab Calcuttawala is an American journalist based in Morocco. She completed her undergraduate coursework at the University of Texas at Austin (Hook’em) and reports on…