investing Daily Article of the Week

by Ari Charney, Investing Daily

Given the extent of the oil shock, it's probably too soon to say that Canada's economy is fully on the mend. But most economists had expected the country's gross domestic product (GDP) growth to reaccelerate during the latter part of the year after an atrocious first half.

And the latest economic data certainly suggest that Canada is finding its footing again. The otherwise lackluster second quarter ended on a strong note, with June GDP up a revised 0.4% month over month, exceeding the consensus forecast by two-tenths of a percentage point.

Now that Statistics Canada has reported the latest numbers for July, we can see that the country's economy has once again surpassed economists' expectations. July GDP grew 0.3% month over month, ahead of the consensus forecast by a tenth of a percentage point.

Two consecutive months of growth is a welcome relief after five straight months of declines.

Since Canada is in the midst of the rough and tumble of an election season, there was some debate over whether the first-half contraction was a “technical” recession.

Many economists quibbled with this characterization, since the declines in GDP weren't accompanied by similar setbacks in other important parts of the economy, such as employment growth.

Regardless of what you call it, the economy's retrenchment appears to have been relatively short-lived. As BMO Capital Markets economist Benjamin Reitzes told theFinancial Post, “Most definitely, this is among the shortest and most mild (recessions) in Canadian history.”

Also a relief is the fact that the economy managed to produce such growth even after oil prices collapsed once more in July.

In fact, oil and gas production was one of the leading contributors to economic growth in July, up 4.4%, mainly due to a 9.1% gain in non-conventional oil production.

Part of the recovery in crude oil volumes appears to be due to a return to normal activity after production was hindered by maintenance activities and wildfires in April and May.