Canada's Economy Hits the Brakes in August Amid Trade Uncertainty

Canada's economy slowed down in August, according to Statistics Canada's early read. The real GDP increased by just 0.2% in August, following no change in July. This marks a softer start to the third quarter after output expanded at an annualized 3.3% pace in the second quarter on an expenditure basis.

The Canadian dollar held onto a slight loss and sovereign debt fell, with the 2-year yield climbing up to five basis points in the aftermath of the release. The Bank of Canada Governor Tiff Macklem warned that new US duties and prohibitions on imports could drag on activity during the latter half of the year, potentially slashing the pace of growth by about 50%.

Construction rose 1.3% for a fourth straight monthly gain, while utilities climbed 1.7%. However, manufacturing slipped 0.9%, led by a 5.7% drop in petroleum and coal product output due to an unexpected outage at a refinery in southwestern Ontario.