Canadian Economy Shows Stagnation in Third Quarter

The Canadian economy is expected to display minimal growth in the third quarter, as industry-level output remained practically unchanged for the third consecutive month in September, according to Statistics Canada. Gross domestic product (GDP), the comprehensive measure of goods and services produced across the economy, remained stagnant in August at 2.082 trillion Canadian dollars ($1.506 trillion). This suggests that the economy has experienced a flatline in the third quarter.

The Bank of Canada anticipates weak economic growth in the coming year following an average growth rate of 1% over the past year. Despite holding its policy interest rate steady at 5%, which stands as a 22-year high, the central bank cautions that inflation may ease slowly. In its updated economic projections, the bank now expects a total GDP growth of 0.8% annually in the third and fourth quarters, following a contraction of 0.2% in the three months ending in June.

In comparison to the data agency's flash estimate and economists' consensus forecast, the pace of industry-level activity in August fell short by recording weaker growth than anticipated.

Economic Analysis: Goods-Producing Industries Contract, Services Industries Show Modest Growth

The recent report from Statistics Canada on the country's Gross Domestic Product (GDP) indicates that goods-producing industries experienced a modest contraction compared to the previous month. However, the production in services industries showed a slight increase.

Wholesale trade, on the other hand, saw an increase in August for the third time in four months, primarily driven by the machinery, equipment, and supplies segment.

Notably, mining and energy extraction witnessed significant growth during the period. This sector has been steadily increasing for the past three months, surpassing the activity level seen in April, prior to the disruption caused by wildfires. Additionally, oil and gas extraction reached its highest level of activity since April 2019, with seven out of the last eight months seeing a rise.

In contrast, manufacturing continued to contract for the third consecutive month. Moreover, accommodation and food services experienced a decline, reversing the gains made in July. Retail trade also displayed weakness, contracting for the third consecutive month, mainly due to a decline in motor vehicle and parts dealers' activities.

Overall, out of the 20 industry sectors monitored by Statistics Canada, eight sectors reported growth in August.

It should be noted that the estimate for September's GDP will be updated when official data is released at the end of next month. Preliminary information suggests that mining, quarrying, oil and gas extraction, and utilities might experience decreases, partially offset by increases in construction and public sectors.