As per usual for this cycle, Canada’s economy is exhibiting both signs of progress as well as stagnation.

The most hopeful signs for the economy occurred during the latter part of the second quarter, though the data weren’t released until this past week. As for economic data of more recent vintage, July employment numbers fell well short of economists’ expectations.

But first, let’s review some of the good news.

Perhaps most important, Canada’s economy reaccelerated in May following a disappointing performance in April.

According to Statistics Canada (StatCan), gross domestic product (GDP) grew a seasonally adjusted 0.4 percent month over month in May, or 2.3 percent year over year, in line with the consensus forecast among economists. Also of note, this was the fifth consecutive monthly increase.

The service sector, which accounts for nearly 70 percent of GDP, climbed 0.4 percent, with 11 of 15 subsectors posting gains.

To get a sense of where longer-term investment trends might be emerging, we like to look at which subsectors boasted the strongest growth over the past year.

On a year-over-year basis, transportation and warehousing was the single strongest performer among services industries, with a rise of 4.0 percent. It also had a solid increase of 1.0 percent month over month in May.

The goods-producing sector, which accounts for about 30 percent of the economy, was up 0.5 percent in May, with gains reported in three out of five subsectors.

The strongest performer was the manufacturing sector, which rose 0.8 percent month over month following April’s 0.2 percent decline. On a year-over-year basis, manufacturing is up 2.9 percent.

Economists with CIBC World Markets note that the April and May GDP numbers put the economy on track to meet the BoC’s forecast of 2.5 percent growth for the second quarter. According to Bloomberg, the consensus among institutional economists is for the economy to expand by 2.6 percent for that period.

Either number would be significant since 2.5 percent is the minimum growth threshold the central bank previously cited as necessary to remove excess capacity from the economy.

Surging Exports

Aside from April’s deficit, Canada’s trade balance has mostly been in surplus this year. In fact, since April, the positive trend has reemerged, with Canada posting a revised trade surplus of CAD576 million in May and now the CAD1.86 billion that StatCan just reported for June.

The latter number is an absolute blockbuster: It’s the second-highest surplus since the Global Financial Crisis, after the CAD2.4 billion surplus reported back in December 2011.

Merchandise exports rose 1.1 percent, to a record high of CAD45.2 billion, led by metal and non-metallic mineral products, consumer goods, and energy products. Volumes were up 1.0 percent, while prices were higher by 0.2 percent.

Imports fell 1.8 percent, to CAD43.3 billion, as declines were recorded in eight of 11 categories. Volumes were down by 1.7 percent, while prices were lower by 0.1 percent.

The US is Canada’s primary export destination, but the June figure was flat compared to the prior month, at CAD34.1 billion. Still, that number was 14.6 percent higher than a year ago and represents 75.4 percent of Canada’s total exports that month.

Meanwhile, exports to other countries grew 4.8 percent, to CAD11.1 billion. This time around, the European Union, whose export market is a distant second to the US, led the way, with exports to the Continent up 12.1 percent month over month, to CAD3.6 billion. On a year-over-basis, exports to the EU have risen 16.8 percent.

Given Canada’s resource riches, the mining and energy industries account for a substantial portion of exports–CAD18.3 billion, or 40.5 percent of total exports, when aggregating the three categories that StatCan has designated for these areas.

But consumer goods were one of the strongest performers on a month-over-month and year-over-year basis, up 8.3 percent and 20.4 percent, respectively, to CAD5.1 billion. That perhaps gives new hope that the Bank of Canada’s (BoC) anticipated resurgence in manufacturing exports could be well underway.

The central bank is looking for a rise in export activity to kick off a virtuous economic cycle of business investment and hiring.

In looking for signs of business investment, we pay close attention to the machinery and equipment category. On that score, import data were disappointing, with industrial machinery and equipment down 3.3 percent month over month, to CAD4.1 billion. However, that number was still 7.9 percent higher than a year ago.

Dismal Data

And the employment front was even more disappointing, with StatCan’s July Labor Force Survey showing the number of jobs were essentially unchanged from the prior month. Economists had expected the economy to add 20,000 jobs, so this was a significant disappointment.

The unemployment rate ticked lower by a tenth of a point, to 7.0 percent, as fewer people were looking for work, while the labor force participation rate fell two-tenths of a point, to 65.9 percent, the lowest level since 2001.

The see-saw battle between full-time and part-time jobs continued, as both swapped places once again. Full-time jobs plummeted by 59,700 positions, following June’s addition of 33,500. And part-time jobs jumped by 60,000 positions after the prior month’s loss of 43,000.

But over the trailing year, part-time job creation has outpaced full-time job creation. During that period, the economy has added 115,000 jobs, an increase of just 0.7 percent, with virtually all growth coming from part-time employment.

For possible investment themes, we like to look at which areas of the economy are enjoying substantial job growth. Among the various subsectors, transportation and warehousing mirrored its strength in the national accounts, with job growth up 1.3 percent month over month and 6.3 percent year over year.

Aside from that, however, there’s not much we can say to sugarcoat this dismal jobs report.

As for the economy overall, private-sector economists forecast GDP growth of 2.2 percent for full-year 2014, while the BoC sees the economy expanding by 2.3 percent. Though that’s nothing to get all that excited about, it’s still somewhat of an improvement over last year. And these forecasts compare quite favorably to the relatively anemic 1.7 percent growth projected for the US this year.

Bay Street Beat

The vast majority of our holdings have reported calendar second-quarter earnings since the last issue, with many earnings releases having occurred over just the past few days.

With a few noteworthy exceptions, most of the shifts in analyst sentiment were merely incremental. As such, we’ll focus our coverage this month on what we believe were the more significant changes.

AltaGas Ltd’s (TSX: ALA, OTC: ATGFF) mix of analyst sentiment turned slightly more bullish, thanks to Macquarie initiating coverage in late July with an “outperform” rating, which is equivalent to a buy. The analyst also set a 12-month target price at CAD54.00.

AltaGas now has six “buys,” three “holds,” and one “sell.” The consensus 12-month target price is CAD52.67, which suggests potential appreciation of 6.8 percent above the current share price.

Canadian Apartment Properties REIT (TSX: CAR-U, OTC: CDPYF) suffered another rating downgrade over the past month, with EVA Dimensions lowering its rating to “hold” from “overweight,” which is equivalent to a “buy.”

The REIT’s mix of analyst sentiment is still bullish, though now with a more neutral tilt, at seven “buys” and four “holds.” The consensus 12-month target price is CAD24.44, which suggests potential appreciation of 5.6 percent above the current unit price.

Cineplex Inc (TSX: CGX, OTC: CPXGF) got a lift from Canaccord Genuity Corp, which upgraded the stock to “buy” from “hold.” The analyst also raised the 12-month target price to CAD42.00 from CAD39.00.

The mix of analyst sentiment is strongly bullish, at nine “buys,” three “holds,” and two “sells.” The consensus 12-month target price is CAD44.04, which suggests potential appreciation of 10.0 percent above the current share price.

Dream Office REIT’s (TSX: D-U, OTC: DRETF) mix of analyst sentiment has shifted from an even split between bullish and neutral to a more neutral tilt, as a result of EVA Dimensions downgrading the REIT to “hold” from “overweight,” which is equivalent to a “buy.”

The REIT’s mix of analyst sentiment now stands at three “buys” and five “holds.” The consensus 12-month target price is CAD32.64, which suggests potential appreciation of 11.8 percent above the current unit price.

Analyst sentiment for Keyera Corp (TSX: KEY, OTC: KEYUF) has shifted to bullish from neutral.

RBC Capital Markets upgraded the stock to “outperform,” which is equivalent to a “buy,” from “sector perform,” or “hold.” The brokerage also boosted its 12-month target price to CAD97.00 from CAD79.00.

And EVA Dimensions raised its rating to “overweight,” which is equivalent to a “buy,” from “hold.”

Finally, Macquarie initiated coverage with an “outperform” rating.

The mix of analyst sentiment now stands at eight “buys” and five “holds.” The consensus 12-month target price is CAD89.18, which is actually 0.2 percent below the current share price.

Northern Property REIT (TSX: NPR-U, OTC: NPRUF) lost another bullish analyst, with EVA Dimensions downgrading the stock to “hold” from “overweight,” which is equivalent to a “buy.”

The mix of analyst sentiment is largely neutral, at two “buys” and seven “holds.” The consensus 12-month target price is CAD30.75, which suggests potential appreciation of 3.2 percent above the current unit price.

Analyst sentiment for TransForce Inc (TSX: TFI, OTC: TFIFF) has become more decidedly bullish, with National Bank Financial upping its rating to “outperform,” which is equivalent to a “buy,” from “sector perform,” or “hold.” The analyst also boosted the 12-month target price to CAD31.00 from CAD26.00.

The mix of analyst sentiment now stands at nine “buys” and four “holds.” The consensus 12-month target price is CAD31.17, which suggests potential appreciation of 13.6 percent above the current share price.

ARC Resources Ltd (TSX: ARX, OTC: AETUF) garnered three ratings upgrades since the last issue, which improves analyst sentiment to moderately bullish from its prior even split.

TD Securities raised its rating to “buy” from “hold,” though its 12-month target price remains at CAD38.00.

National Bank Financial upped its rating to “outperform,” which is equivalent to a “buy,” from “sector perform,” or “hold,” while reiterating its 12-month target price of CAD35.00.

And finally, EVA Dimensions upgraded the stock to “overweight,” which is equivalent to a “buy,” from “hold.”

The mix of analyst sentiment now stands at 13 “buys,” seven “holds,” and one “sell.” The consensus 12-month target price is CAD34.90, which suggests potential appreciation of 17.2 percent above the current share price.

Peyto Exploration & Development Corp (TSX: PEY, OTC: PEYUF) suffered two downgrades over the past month, though analyst sentiment still tilts toward bullish.

RBC Capital Markets cut its rating to “sector perform,” which is equivalent to a “hold,” from “outperform,” or “buy,” but it maintained its 12-month target price at CAD43.00.

And Salman Partners downgraded the stock to “hold” from “buy,” while also lowering its 12-month target price to CAD38.00 from CAD45.00.

The mix of analyst sentiment now stands at 11 “buys,” nine “holds,” and one “sell.” The consensus 12-month target price is CAD45.14, which suggests potential appreciation of 24.0 percent above the current share price.

PHX Energy Services Corp (TSX: PHX, OTC: PHXHF) received two more “buy” ratings this month, and analyst sentiment is now strongly bullish, at nine “buys” and one “hold.”

FirstEnergy Capital Corp raised its rating to “outperform,” which is equivalent to a “buy,” from “market perform,” or “hold,” while reiterating its 12-month target price at CAD18.00.

And EVA Dimensions upped its rating to “overweight,” which is equivalent to a “buy,” from “hold.”

The consensus 12-month target price is CAD18.89, which suggests potential appreciation of 22.3 percent above the current share price.

National Bank Financial initiated coverage of ShawCor Ltd (TSX: SCL, OTC: SAWLF) with an “outperform” rating, which is equivalent to a “buy.” The analyst’s 12-month target price is CAD70.00.

The mix of analyst sentiment now stands at five “buys” and two “holds.”

The consensus 12-month target price is CAD66.17, which suggests potential appreciation of 17.6 percent above the current share price.

Vermilion Energy Inc (TSX: VET, OTC: VEMTF) endured two defections from the bullish column this past month.

EVA Dimensions lowered its rating to “hold” from “overweight,” which is equivalent to a “buy.”

And Salman Partners cut its rating to “hold” from “buy,” while also lowering its 12-month target price to CAD74.00 from CAD80.00.

The mix of analyst sentiment is still bullish, though now with an even more pronounced neutral tilt, at 12 “buys,” nine “holds,” and one “sell.”

The consensus 12-month target price is CAD79.14, which suggests potential appreciation of 14.3 percent above the current share price.

In the listing below, the number of analyst “buy,” “hold” and “sell” ratings for each company are shown, followed by the average 12-month target price among the analysts for which we have access to such data.

Month-over-month variances in the number of analysts listed below for each stock are often due to those securities being on a brokerage’s restricted list for a brief period. A restricted list is a compliance measure that’s typically used during the period when the investment banking side of an analyst’s firm is involved in advising the company.

Conservative Holdings

• AltaGas Ltd (TSX: ALA, OTC: ATGFF)–6–3–1 (CAD52.67)
• Artis REIT (TSX: AX-U, OTC: ARESF)–6–3–1 (CAD17.19)
• Bank of Nova Scotia (TSX: BNS, NYSE: BNS)–11–9–1 (CAD73.93)
• Bird Construction Inc (TSX: BDT, OTC: BIRDF)–5–1–1 (CAD16.00)
• Brookfield Real Estate Services Inc (TSX: BRE, OTC: BREUF)–0–1–0 (CAD15.00)
• Brookfield Renewable Energy Partners LP (TSX: BEP-U, NYSE: BEP)–7–3–2 (CAD34.58)
• Canadian Apartment Properties REIT (TSX: CAR-U, OTC: CDPYF)–7–4–0 (CAD24.44)
• Cineplex Inc (TSX: CGX, OTC: CPXGF)–9–3–2 (CAD44.04)
• DH Corp (TSX: DH, OTC: DHIFF)–3–5–1 (CAD33.93)
• Dream Office REIT (formerly Dundee REIT) (TSX: D-U, OTC: DRETF)–3–5–0 (CAD32.64)
• EnerCare Inc (TSX: ECI, OTC: CSUWF)–4–2–0 (CAD14.48)
• Innergex Renewable Energy Inc (TSX: INE, OTC: INGXF)–0–7–1 (CAD11.11)
• Keyera Corp (TSX: KEY, OTC: KEYUF)–8–5–0 (CAD89.18)
• Northern Property REIT (TSX: NPR-U, OTC: NPRUF)–2–7–0 (CAD30.75)
• Pembina Pipeline Corp (TSX: PPL, NYSE: PBA)–7–5–1 (CAD48.14)
• RioCan REIT (TSX: REI-U, OTC: RIOCF)–4–5–0 (CAD29.86)
• Shaw Communications Inc (TSX: SJR/B, NYSE: SJR)–3–13–2 (CAD26.47)
• Student Transportation Inc (TSX: STB, NSDQ: STB)–2–3–1 (CAD7.58)
• TransForce Inc (TSX: TFI, OTC: TFIFF)–9–4–0 (CAD31.17)

Aggressive Holdings

• Acadian Timber Corp (TSX: ADN, OTC: ACAZF)–1–1–1 (CAD13.83)
• Ag Growth International Inc (TSX: AFN, OTC: AGGZF)–7–4–0 (CAD51.58)
• ARC Resources Ltd (TSX: ARX, OTC: AETUF)–13–7–1 (CAD34.90)
• Chemtrade Logistics Income Fund (TSX: CHE-U, OTC: CGIFF)–2–3–1 (CAD21.60)
• Crescent Point Energy Corp (TSX: CPG, NYSE: CPG)–22–2–1 (CAD51.48)
• Enerplus Corp (TSX: ERF, NYSE: ERF)–14–5–0 (CAD29.44)
• Extendicare Inc (TSX: EXE, OTC: EXETF)–0–3–2 (CAD7.58)
• Lightstream Resources Ltd (TSX: LTS, OTC: LSTMF)–3–12–3 (CAD7.25)
• Magna International Inc (TSX: MG, NYSE: MGA)–12–9–1 (CAD121.62)
• Newalta Corp (TSX: NAL, OTC: NWLTF)–6–3–1 (CAD23.30)
• Noranda Income Fund (TSX: NIF-U, OTC: NNDIF)–1–0–0 (CAD7.00)
• Parkland Fuel Corp (TSX: PKI, OTC: PKIUF)–6–3–0 (CAD21.84)
• Peyto Exploration & Development Corp (TSX: PEY, OTC: PEYUF)–11–9–1 (CAD45.14)
• PHX Energy Services Corp (TSX: PHX, OTC: PHXHF)–9–1–0 (CAD18.89)
• ShawCor Ltd (TSX: SCL, OTC: SAWLF)–5–2–0 (CAD66.17)
• Vermilion Energy Inc (TSX: VET, OTC: VEMTF)–12–9–1 (CAD79.14)