OTTAWA (Reuters) – Canada’s gross domestic product was unchanged in August before likely expanding by 0.3% in September, data showed on Thursday, indicating the economy missed the central bank’s growth forecast for the third quarter.
The reading for August matched the median forecast of analysts polled by Reuters.
A 1.2% contraction in manufacturing was the biggest drag on the economy in August, Statistics Canada data showed. Retooling and maintenance activities at multiple auto plants contributed to the decline.
Canada’s goods-producing industries, which include the manufacturing sector, fell to its lowest level since December 2021.
Economic growth has slowed in Canada under the impact of high borrowing costs. The Bank of Canada (BoC) has said it wants the economy to strengthen and has cut interest rates four times in a row to spur growth as inflation returned to the bank’s 1-3% control range this year.
In a preliminary estimate for September, Statscan said GDP was likely up by 0.3%, helped by increases in finance and insurance, construction, and retail trade sectors. At the same time, July’s GDP growth rate was downwardly revised to 0.1% from 0.2% initially reported.
The monthly GDP figures translate to 1.0% annualized growth in the third quarter. The BoC projects growth to slow to 1.5% in the July-September before it picks up in the fourth quarter.
At its last policy-setting meeting, the bank lowered its key rate by a larger-than-usual 50 basis points, and some economists say the bank may need another large interest rate cut to boost growth.
In addition to manufacturing, the transportation and warehousing sector also weighed on the economy in August. Rail transportation, hit by work stoppages at Canada’s two biggest rail companies, was the largest contributor to the decline in the transportation sector.
Overall, Canada’s goods-producing sector contracted 0.4%, while the services sector posted a 0.1% increase.
Thursday’s GDP figures are based on Canada’s industrial output while quarterly figures, which will be released next month, are based on an alternate calculation and can differ.
(Reporting by Ismail Shakil in Ottawa; Editing by Dale Smith)
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