The Toronto Stock Exchange is marching higher on news that Canada’s economy grew for the first time in four months.
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Statistics Canada reports that gross domestic product (GDP) grew 0.2% in July of this year, the first increase in four months. However, preliminary estimates for August indicate that GDP for that month was unchanged.
Still, the fact that the Canadian economy grew in July comes as a relief and allays concerns among economists, politicians, and business leaders that the country was headed for a recession. News of the growth has well-known Canadian stocks such as Shopify (SHOP), Air Canada (TSE:AC), and Lululemon Athletica (LULU) on the rise.
Tariff Impacts
Since the spring, Canada’s economy has struggled under the weight of tariffs imposed by the neighboring U.S., which have impacted Canadian exports and the manufacturing sector. There has also been evidence that Canada’s labor market is cooling. To help boost the economy, the Bank of Canada lowered interest rates by 25 basis points on Sept. 17.
In terms of July’s performance, Statistics Canada said that the economic growth was driven by goods-producing industries, as well as mining, quarrying, and oil and gas extraction. Additionally, the manufacturing sector rebounded and grew 0.7% in July. Partially offsetting the gains was a 1% decline in the retail sector as Canadian consumers tighten their purse strings.
Is AC Stock a Buy?
Air Canada’s stock has a consensus Strong Buy rating among 11 Wall Street analysts. That rating is based on nine Buy and two Hold recommendations issued in the last three months. The average AC price target of C$26.27 implies 45.10% upside from current levels.
