Canadian Economy Grows As Damaged Oil Facility Recovers, But Concerns Loom On Horizon

Canada’s economy grew by 0.6% in May, surpassing economists expectations of 0.2% growth.

The rate of growth in April was 0.2%, unrevised from previous estimates.

According to BNN, the May figures could increase the odds of another interest rate increase from the Bank of Canada.

However, a closer look at the stats reveals a more complicated picture.

Of the 0.6% growth, 0.4 percentage points were from the oil and gas sector. And as noted by BNN, “Oil and gas extraction surged 7.6 per cent as activity at a facility in Alberta recovered after a fire and explosion in March that caused production difficulties, the statistics agency said.”

So, most of the growth came from the oil & gas sector because of the recovery a damaged facility. That represents the recovery of previously lost growth, not an expansion.

Meanwhile, manufacturing rose 1.1%, and the retail sector grew 0.9%.

Despite the recovery of a facility and minimal growth elsewhere, there are concerns looming on the horizon. According to Statistics Canada, there was a 6.3% fall in activity at real estate agent and brokers offices, a sign of a pending downturn in Canada’s housing market.

There are also looming debt problems, with household debt reaching record levels. As I’ve said before, any economy can achieve temporary growth based upon massive government spending and growing debt levels. Of course, that growth is not sustainable, and a focus on month-to-month figures can distract from bigger long-term trends. Those trends do not bode well for the Canadian economy.

Spencer Fernando

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Bob Johnston

Reliance on economic growth from the oil and gas sector must be replaced by expansion in other sectors including retail forestry and manufacturing for example.
The future of Canada must be independent from fossil fuels.

jack grandville

Not being cognizant of a great deal of what is ‘financing’ I resist commenting and displaying my ignorance. However, my knowledge does cover the strain that our government is placing on families with the policies they pursue which definitely impact the average household. What I see with this government is nothing short of greed, a greed which without extremely careful management does and will continue to reduce the amount of monies needed to maintain household debt. Frankly, from my point of view, my conclusion is that our present government is acting a great deal like the ‘drunken sailor on shore… Read more »