Canada’s economy shrank 0.3% in August
Statistics Canada data showed on Friday that Canada’s economy shrank in August despite widespread expectations of no growth, but an upgraded estimate showed the economy could avoid a recession in the third quarter.
Statistics Canada said the economy contracted 0.3 per cent in August after a revised report of 0.3 per cent growth in the previous month, effectively offsetting any growth so far in the current quarter.
It said this was the fourth monthly contraction in five months and was due to a decline in output of both the services and goods sectors.
An advance indicator suggested monthly gross domestic product was likely to rise 0.1 per cent in September, bringing overall third-quarter annual growth to 0.4 per cent, missing the Bank of Canada forecast.
Advance estimates are not always accurate and may change. Annual quarterly estimates are based on industrial production data while StatsCan will publish annual quarterly GDP based on income and expenditure.
Potential growth in the third quarter, which is largely dependent on the economy boosting output in September, means Canada could avoid a recession in the third quarter.
Two consecutive quarterly contractions are considered a recession.
Tariffs continue to hit the economy
Canada’s GDP shrank 1.6 per cent in the second quarter as the impact of tariffs on steel, cars, lumber and aluminum and general trade uncertainty reduced exports and hurt growth.
The Bank of Canada said this week that annual gross domestic product is expected to contract 0.5 per cent in the third quarter.
The manufacturing sector, which is hardest hit by US tariffs and accounts for about a tenth of GDP, shrank by 0.5 percent in August, data from the statistics agency showed.
However, the largest decline was seen in mining, quarrying and oil and gas extraction, which declined by 0.7 per cent, mainly due to a 1.2 per cent decline in metal ore mining and a five per cent decline in coal mining, Statistics Canada said.
In the services sector, the main contraction was seen in transportation and storage, partly due to the airline strike, as well as wholesale trade.
However, growth in retail trade and real estate and rental and leasing helped offset some of the decline in the services sector.
