Canada's economic growth came to a halt in August, marking the second consecutive month of stagnation, according to data released by Statistics Canada on Friday. The real gross domestic product (GDP) showed no change for the month, defying economists' expectations of a 0.2% growth as predicted by Reuters. Key sectors like wholesale trade and the public sector contributed to the slowdown, with wholesale trade declining by 1.4% due to contractions across most subsectors, including motor vehicle wholesalers. The public sector also saw a decline as the 2026 census work concluded.
Despite some bright spots such as a 1.2% growth in retail trade and gains in manufacturing, transportation, and finance sectors, the overall economic performance was weak. The mining, quarrying, and oil and gas sector remained flat as increased mining activity was offset by decreased oil and gas production due to maintenance. Early estimates for September suggest a 0.1% decline in real GDP, driven by losses in manufacturing and mining, quarrying, and oil and gas extraction.
Economists like BMO's Doug Porter noted that the recent weakness in economic activity contrasts with the momentum observed earlier in the year. Porter attributed some of the weakness to the one-off impact of the census but highlighted ongoing challenges such as the U.S. trade war and declining job numbers. Despite the stagnation, Statistics Canada's flash estimates indicate a 1.3% annualized GDP growth in the third quarter, down from 3.3% in the second quarter.
The Bank of Canada raised its key lending rate to 2.5% earlier this week, citing inflation driven by rising energy prices. CIBC economist Andrew Grantham suggested that the latest data supports the bank's decision to hold off on further rate hikes for now, as economic momentum heading into the fourth quarter appears weaker than expected.