Canada's Economy Stalls for a Second Month: August GDP Flat, September Seen Down 0.1%, Q3 Annualized Growth Just 1.3%

Statistics Canada reported on October 30 that real GDP was essentially unchanged in August, a second consecutive month without meaningful growth — July was also flat. The August reading missed the 0.2% gain forecast by economists polled by Reuters, and Statistics Canada's own earlier advance estimate of 0.2%.

What rose and what dragged

Nine of 20 industrial sectors expanded. Retail trade rose 1.2% and manufacturing grew 0.3%, its fifth increase in seven months. Services-producing industries fell 0.1%, led by a 1.4% drop in wholesale trade, while public administration also declined, offsetting a 0.2% rise in goods-producing industries. Oil and gas extraction fell 1.2%, its third straight monthly decline, and the public-sector aggregate (education, health care and social assistance, and public administration) fell 0.2%, its first decline in six months.

September and third-quarter figures are still preliminary

Statistics Canada's advance estimate points to a 0.1% contraction in September, driven by declines in manufacturing and in mining, quarrying, and oil and gas extraction. Industry-based figures imply third-quarter growth of about 0.3% quarter on quarter, or about 1.3% annualized — below the Bank of Canada's projection of 2% annualized for the quarter and well below the second quarter's 3.3% annualized pace. The agency cautions that the September and third-quarter figures are preliminary and subject to revision; official September industry data and the official third-quarter income-and-expenditure GDP estimate are due November 30. The Bank of Canada's policy rate stands at 2.5% following its October 28 decision.