| OTTAWA, Sept 30
OTTAWA, Sept 30 The Canadian economy got off to
a stronger-than-expected start in the third quarter, fueled by a
rebound in oil and gas extraction that had been disrupted by
wildfires in Alberta earlier this year.
Friday's report from Statistics Canada reinforced
expectations that the economy recovered in the third quarter and
likely provided room for the Bank of Canada to leave interest
rates where they are for now, economists said. The bank next
meets in October.
Gross domestic product grew 0.5 percent in July, topping
analysts' forecasts for a gain of 0.3 percent.
Activity in the mining and oil and gas extraction sector
jumped 3.9 percent. The non-conventional oil extraction sector
surged 19 percent as production returned to normal after the
wildfire and maintenance shutdowns in April.
"All in all a solid report," said Andrew Kelvin, senior
rates strategist at TD Securities.
"It really hammers home the idea that the Bank of Canada is
going to be on hold for the rest of the year."
Canada's economy shrank in the second quarter due to weak
exports and the impact of May's wildfires in the oil-producing
province of Alberta.
While economists widely expect relatively strong growth in
the third-quarter, there is more uncertainty over whether the
pace can be sustained.
Earlier this month, the Bank of Canada acknowledged that the
ground lost in exports means the growth profile could be weaker
than it had anticipated.
The dovish tone prompted some to speculate that the bank
could cut rates in the near-term, but Friday's report should see
some of that talk dissipate, economists said.
The Canadian dollar strengthened against the greenback
following the report.
On the whole, the bank is expected to hold interest rates
where they are at least until 2018 after cutting twice last year
to offset the oil price shock.
The accommodation and food industry also contributed to
economic growth in July as Canada saw an influx of tourists.
Manufacturing rose, helped by a rise in non-durable goods.
But construction tumbled for the fourth month in a row, partly
due to a decrease in residential building.
Separate data showed Canadian producer prices unexpectedly
fell in August as meat and dairy products saw the largest
decrease in nearly nine years. Raw materials prices also
decreased, weighed by lower prices for animals.
(Additional reporting by Fergal Smith in Toronto; Editing by