July economic figures bring fears economic recovery could run out of steam

Canada’s economy continues to recover but at a slower pace than it first showed coming out of this spring’s COVID-19 onslaught.

Statistics Canada reports that real gross domestic product (GDP) grew 3.0 per cent in July.

That was down from 6.5 per cent in June building on a 4.8 per cent gain in May following the plunge in March and April due to the pandemic.

StatsCan says the economy is still running about 6 per cent below its pre-pandemic level in February.

The agency says preliminary information indicates an approximate 1.0 per cent increase in real GDP for August.

StatsCan says that while the economy as a whole has recovered to 95 per cent of its pre-pandemic size, growth in most sectors remained muted, even as more businesses began to open in the summer.

GDP July (Scott Galley/CBC)

The data showed that all 20 sectors of the economy grew but only five of the sectors were producing more in July than February, indicating an uneven economic recovery.

The arts and entertainment sector was hit hardest, with July output 53 per cent below February levels.

Accommodation and food services were down by a third.

Output in agriculture, utilities, finance and insurance businesses, as well as real estate rental and leasing companies, clawed back to where it was before the pandemic struck. 

TD Bank economist Sri Thanabalasingam told CBC News that based on the July numbers, fears that the country’s economic recovery is running out of steam are well-founded.

“Slowing and uneven growth are indications that the Canadian economy is transitioning from the rebound phase to a more challenging stage of the recovery,” he said.

“Even without restrictions, consumers and businesses may rein in spending activity in response to rising caseloads. The second wave is now upon us, and the course of the recovery will depend on our success in containing it.”

With files from CBC News, The Canadian Press