Canada's Economy Stalls in August as GDP Comes in Flat
Statistics Canada reported that real GDP was essentially unchanged in August, missing expectations for a 0.2 per cent gain and marking a second consecutive month of stalled growth. Early estimates point to a slight decline in September, prompting economists to lower their third-quarter outlooks below the Bank of Canada's forecast.
Canada’s real gross domestic product was essentially unchanged in August, falling short of expectations for a 0.2 per cent gain and marking a second consecutive month of stalled growth, according to Statistics Canada.
Wholesale trade contracted by 1.4 per cent during the month, with motor vehicle and parts wholesalers recording their first decline in seven months. Lower vehicle imports and weaker manufacturing activity contributed to the drop in wholesale trade. Oil sands extraction was the biggest drag on overall growth due to maintenance at facilities in northern Alberta, offsetting strength seen in mining and quarrying. Maintenance outages at nuclear power plants also dragged down the utilities industry, while the winding down of 2026 census preparation work caused contractions in public administration.
Not all sectors retreated. Retail trade grew by 1.2 per cent in August, making up for a decline in July. Manufacturing also posted gains, rising for the fifth time in seven months.
Looking ahead, early estimates suggest real GDP declined 0.1 per cent in September, driven by losses in manufacturing and mining. Statscan flash estimates project real GDP expanding 1.3 per cent on an annualized basis in the third quarter, a sharp deceleration from the 3.3 per cent pace recorded in the second quarter.
The data arrives just two days after the Bank of Canada raised its benchmark interest rate by a quarter point to 2.5 per cent. The central bank currently expects third-quarter growth to be 2 per cent on an annualized basis, up from its July forecast of 1.5 per cent. However, the weaker-than-expected economic data may reduce the need for additional interest rate hikes.
Following the release, BMO chief economist Doug Porter trimmed BMO's third-quarter growth outlook to 1.5 per cent.