Canada economy stalls as September GDP estimate points to quarterly slowdown
Canada's economy shows no growth in August after also remaining flat in July, undershooting market expectations for a monthly increase. An early estimate for September points to a 0.1% contraction, putting third-quarter annualized growth by industry on track to fall short of the Bank of Canada's latest forecast.
Highlights
- Canada's GDP was flat in August after zero growth in July, missing expectations for a 0.2% increase according to Statistics Canada.
- An advance estimate projects GDP will contract 0.1% in September, lowering Q3 annualized real growth to 1.3%, below the Bank of Canada's 2% forecast.
- Weakness in manufacturing, mining, quarrying, and oil and gas extraction drove the slowdown, despite retail trade rising 1.2% and manufacturing up 0.3% in August.
August data and September estimate
As reported by Reuters, Statistics Canada says gross domestic product is flat in August after zero growth in July, compared with analysts' expectations for a 0.2% increase in a Reuters poll.An advanced estimate from the agency shows GDP is likely to contract by 0.1% in September, bringing annualized real growth by industry in the third quarter to 1.3%. That pace is substantially below the Bank of Canada's latest projection for 2% annualized growth in the quarter.
The weaker September reading is mainly led by declines in manufacturing, mining and quarrying, and oil and gas extraction.
Sector shifts weigh on growth outlook
Statistics Canada says a decline in services-producing industries in August is mostly offset by higher activity in goods-producing sectors, which account for roughly a quarter of GDP.Services-producing industries fall 0.1%, led by a 1.4% drop in wholesale trade. The public sector aggregate, which includes educational services, health care and social assistance, and public administration, declines 0.2% in its first decrease in six months. Utilities contract 0.4%, driven by a 0.5% decline in electric power generation, transmission and distribution.
Some sectors provide support during the month. Retail trade rises 1.2%, recovering from a contraction in the previous month, while manufacturing grows 0.3%, marking its fifth increase in seven months. Construction also increases 0.2%, while mining, quarrying and oil and gas extraction is flat in August.
Our earlier coverage of the UK’s August GDP update and the government’s pre-Budget stance highlighted signs of only modest growth resilience alongside a push for tighter fiscal discipline. We also outlined how the debate around deficit reduction, investor confidence, and structural reforms was intensifying ahead of the October Budget, keeping markets focused on how policy choices may influence growth momentum.
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