Real gross domestic product (GDP) in Canada was essentially unchanged in August, following a 0.1% increase in July, reported Statistics Canada on Thursday.
“The services-producing industries edged up 0.1% in August, driven in large part by increases in the finance and insurance and the public administration sectors. Goods-producing industries (-0.4%) reached its lowest level since December 2021, with the manufacturing and utilities sectors causing the decline within this aggregate. Overall, 12 of 20 sectors expanded in August,” said the federal agency.
“Advance information indicates that real GDP increased 0.3% in September. Increases in finance and insurance, construction, and retail trade were partially offset by decreases in mining, quarrying, and oil and gas extraction. Owing to its preliminary nature, this estimate will be updated on November 29, 2024, with the release of the official GDP by industry data for September.
Photo- Khwanchai Phanthong
“With this advance estimate for September, information on real GDP by industry suggests that the economy expanded 0.2% in the third quarter of 2024. The official estimate for the third quarter will be available on November 29, 2024, when the official estimate of GDP by income and expenditure is released.”
StatsCan said the manufacturing sector was the largest detractor to growth in August, decreasing 1.2%, with both durable goods and non-durable goods manufacturing contributing to the decline.
“The public sector aggregate (comprising educational services, health care and social assistance, and public administration) increased for the eighth consecutive month, up 0.2% in August,” it added.
“Public administration (+0.5%) contributed the most to growth within the public sector aggregate in August. For a fourth month in a row, local, municipal and regional public administration (+0.6%) was the largest contributor to growth within the public administration sector. Health care and social assistance (+0.2%) also expanded in August while the educational services sector was essentially unchanged.”
Andrew Grantham, Senior Economist, CIBC Capital Markets, said Canadian GDP was both trick and treat, with weakness at the start of Q3 followed by a solid rebound during its final month.
“Monthly GDP was flat in August, which was in line with the consensus forecast but followed a downwardly revised 0.1% gain in the prior month (previously +0.2%). Weakness in August was partly the result of brief rail stoppage, which led to a near 8% monthly decline in that sector, although other areas such as manufacturing, utilities and wholesaling also saw declines. These declines were offset by growth in areas including public admin, finance and retail. With August GDP partly held back by temporary factors, we expected a rebound in September and the advance estimate of +0.3% points to just that,” he said.
“However, even with the solid September figure, due to the downward revision at the start of the quarter, for Q3 as a whole growth is still tracking weaker than it was prior to today’s release and slightly below the Bank of Canada’s already downgraded forecast (1.0% vs 1.5% in the October MPR and 2.8% in the July MPR). While the final expenditure figures can diverge from the monthly industry data, and the Bank will have these quarterly figures at hand before its next rate decision in December, for now these data support our call for another 50bp cut at the next meeting in an effort to try and accelerate growth and reduce slack in the economy.”
Marc Ercolao, Economist, TD, said the GDP data confirm economic momentum is cooling after somewhat decent growth in the second quarter.
“Even with current guidance pointing to a strong bounce back in September, downward data revisions to prior months has third quarter growth tracking around 1.0% quarter-on-quarter (q/q) annualized. This poses downside risk to the Bank of Canada’s recently revised Q3 forecasts of 1.5% (down from a hefty 2.8% previously),” he said.
“The BoC’s next rate decision isn’t until mid-December and there is still a lot of data to digest between now and then. We don’t think this will ring any alarm bells for the Bank but it puts more emphasis on their fears around a weakening economy. That said, we think the cumulative 125 bps of cuts delivered to date will do it’s part in reigniting economic activity into the end of they year. Looking ahead, more cuts are on the way, with the focus now shifting to upcoming labour market and inflation data.”
Douglas Porter, Chief Economist, BMO, said on balance, this is a mildly disappointing set of results—culminating in just 1% Q3 growth—although the expected rebound in September offers a sprinkling of good news.
“Bigger picture, the Canadian economy continues to grind along in a modest growth channel of around 1%-to-1.5%, holding below potential and opening up more slack. While far from conclusive, chalk this one up on the dovish side of the ledger. However, the BoC will see another GDP result (the full Q3 report) before next deciding on rates, along with two jobs reports and another CPI, so this less-than-scary reading hardly settles the debate over the next move,” he said.
Mario Toneguzzi
Mario Toneguzzi is Managing Editor of Canada’s Podcast. He has more than 40 years of experience as a daily newspaper writer, columnist, and editor. He was named in 2021 as one of the Top 10 Business Journalists in the World by PR News – the only Canadian to make the list. He was also named by RETHINK to its global list of Top Retail Experts 2024.
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