Canada's real gross domestic product held steady in August, marking a second consecutive month without growth, according to figures released Friday by Statistics Canada and reported by CBC. The agency's preliminary estimate for September points to a 0.1 per cent contraction, suggesting the economy lost momentum heading into the fall.
The August result fell short of expectations. Economists surveyed by Reuters had forecast growth of 0.2 per cent for the month.
Why it matters
Two flat months followed by a projected decline add up to a soft stretch for the Canadian economy, and the timing is awkward for the Bank of Canada. The central bank raised its policy rate by a quarter point to 2.5 per cent this week, citing the economy's resilience in the face of U.S. tariffs. CBC reports that BMO chief economist Doug Porter questioned that framing in a note to clients, saying the momentum that seemed to be building in the spring, and which the Bank of Canada referenced at length, has not carried through.
The weakness also bears on what the central bank does at its next decision. CIBC economist Andrew Grantham wrote that while the Bank of Canada had already anticipated some slowing in the fourth quarter of 2026, the latest figures suggest the economy is entering that period with less strength than expected. He added that the release supports the bank holding off on another rate increase for now, though he noted considerable data is still due before the December meeting.
Where the economy lost ground
Wholesale trade was the clearest drag in August, falling 1.4 per cent as most subsectors shrank. According to Statistics Canada, wholesalers of motor vehicles and motor vehicle parts contracted for the first time in seven months, reflecting a drop in car manufacturing and fewer imported passenger vehicles.
The public sector also pulled the headline number down. Activity across education services, health care and social assistance weakened, and work by government public administration accounted for the largest part of the decline as the 2026 census wound down.
The mining, quarrying and oil and gas sector was flat overall. Higher mining and quarrying output was cancelled out by lower oil and gas production, which the agency linked to maintenance at some facilities.
Bright spots in retail and manufacturing
Not every corner of the economy stalled. Retail trade grew 1.2 per cent, more than recovering from a July setback. Manufacturing expanded for the fifth time in seven months, and transportation and warehousing posted gains alongside finance and insurance.
The September flash estimate attributes the expected 0.1 per cent decline partly to losses in manufacturing and in mining, quarrying and oil and gas extraction.
Porter suggested the census-related drop may exaggerate the softness, since it was a one-time event. Even so, he pointed to the continuing trade war and weakening job numbers in recent months as clear reasons growth would be hard to come by.
Quarterly picture still positive, but below the bank's view
Despite the flat summer and the September setback, Statistics Canada's early estimates have real GDP rising 1.3 per cent on an annualized basis in the third quarter. That would be a marked slowdown from 3.3 per cent in the second quarter, and it sits below the two per cent the Bank of Canada projected for the quarter in its monetary policy report published Wednesday.
The central bank's rate increase this week was aimed at containing inflation driven by rising energy prices, with governor Tiff Macklem describing the move as necessary. Economists are split on whether it begins a series of increases or whether the bank will hold at 2.5 per cent while watching for further evidence.
Attention now turns to the data due before the Bank of Canada's December meeting, which will show whether September's expected decline was a one-month dip or the start of a deeper slowdown.
