Canada: Economy slips into contraction in August
GDP reading: GDP was down 0.3% on a seasonally adjusted month-on-month basis in August, following a 0.3% rise in the prior month.
Drivers: August’s decline was due to decreases in goods-producing and services-producing industries. With services, transport activity was negatively affected by a workers’ strike.
GDP outlook: Preliminary data suggests real GDP edged up 0.1% in September. Growth in manufacturing, financial and insurance services, and resource-related industries such as mining, quarrying, and oil and gas extraction was partly counterbalanced by declines in both wholesale and retail trade. As a result, the economy is expected to have expanded marginally in Q3 from Q2.
Panelist insight: On the data and outlook, TD Economics’ Marc Ercolao said:
“Tariff-impacted industries remain under pressure from trade-related challenges. While consumption and domestic demand have shown some stability, third-quarter GDP growth is tracking a paltry 0.4% annualized. […] The BoC has acknowledged that trade-related impacts on inflation and economic growth are become more clear. We’d agree, though that doesn’t lower the level of uncertainty in coming quarters as Canada and the U.S. continue to work on hammering out a trade deal. For now, the growth backdrop is expected to remain weak and gradually recover over the medium-term.”