Canada's Economy Stalls in August as GDP Posts Second Consecutive Month of Flat Growth
Statistics Canada reported that real GDP was essentially unchanged in August 2026, missing economist expectations. Gains in retail trade and manufacturing were offset by declines in wholesale trade and the public sector, while advance estimates point to a slight contraction in September.
Canada’s economy stalled in August 2026, with real gross domestic product (GDP) posting a 0.0% monthly change, according to Statistics Canada. The flat reading marked the second consecutive month of no growth, following an unchanged performance in July, and fell short of the 0.2% expansion economists polled by Reuters had predicted.
Growth in consumer-facing sectors helped prevent a broader decline. Retail trade rose 1.2% in August, supported by rebounds across several categories: motor vehicle and parts dealers climbed 1.8%, general merchandise retailers increased 1.5%, and both food and beverage retailers and health and personal care retailers grew 1.3%.
The manufacturing sector also expanded, rising 0.3% for its fifth increase in seven months. Machinery manufacturing led the gains with a 3.8% jump, while petroleum refineries grew 4.2%. However, transportation equipment manufacturing decreased 3.1%, weighed down by a 5.8% contraction in motor vehicles and parts manufacturing linked to a prolonged summer shutdown at a major auto assembly plant.
These advances were offset by weakness elsewhere. Wholesale trade declined 1.4%, driven by a 4.4% contraction among motor vehicle and parts wholesalers amid lower imports and weaker manufacturing activity. The public sector aggregate fell 0.2%, its first decline in six months, primarily because federal government public administration dropped 2.1% as preparations for the 2026 Census wound down.
In other sectors, rail transportation recorded its largest monthly growth rate since March 2025, expanding 3.6% on higher wheat movements and intermodal shipments. Finance and insurance rose 0.2% on broad-based expansions, including banking. Mining, quarrying, and oil and gas extraction was essentially unchanged overall; mining and quarrying (except oil and gas) surged 4.9%, but oil and gas extraction fell 1.2%. Utilities contracted 0.4% due to maintenance outages at nuclear power plants in Ontario and New Brunswick.
Looking ahead, economic momentum appears subdued. Advance estimates indicate real GDP decreased 0.1% in September 2026. Based on these figures, Statistics Canada projects the economy expanded 0.3% in the third quarter of 2026. CBC News reported flash estimates placing annualized third-quarter growth at 1.3%.
CIBC economist Andrew Grantham noted that the data supports the Bank of Canada holding interest rates steady despite recent hikes.