The Bank of Canada this week downgraded its estimate of growth for 2013, noting that the long-awaited rotation of the economy into an export-led recovery has yet to occur and that it’s dropping its bias toward monetary tightening.
The central bank warned the U.S. recovery is still struggling to gain traction, which is affecting demand for Canadian goods. And the shutdown of large parts of the U.S. government in October over budget issues is likely to deal a further blow to fourth quarter growth.
But the central bank’s warnings already are old news. Just as it slashed its forecast, there was a positive report about Canada’s Gross Domestic Product, which grew more than expected in August.
It was led by a surprising spike in oil and gas activity and was supported by strength in a variety of other sectors such as real estate.
“The Canadian economy is finally churning out reasons to be more optimistic,” commented Emanuella Enenajor of CIBC Economics.
Something is clearly brewing in Canada’s oil and gas sector, she said, which has seen a flurry of new deals and project announcements in recent weeks. All that is coming in spite of the well-reported story that Alberta’s petroleum production might be shut out of markets by a lack of pipeline infrastructure.
One month may be a small sample size. But the heady growth in August was based on solid increases in oil and gas production, which rose for the third straight month and hit a historic high.
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