Canada’s economy contracted by 0.3% in August, according to Statistics Canada, defying expectations of zero growth and marking the fourth monthly decline in five months.
The decline followed a revised 0.3% gain in July, which effectively offsets any net growth so far this quarter. Both services and goods-producing sectors recorded losses.
However, an advance estimate suggests GDP could grow by 0.1% in September, translating to 0.4% annualized growth for the third quarter — slightly below the Bank of Canada’s forecast of 0.5%.
If confirmed, the third quarter expansion would mean Canada narrowly avoided a recession, which is defined as two consecutive quarters of economic contraction.
Tariffs Continue to Drag Growth
Canada’s second-quarter GDP had already fallen 1.6%, as tariffs on steel, cars, lumber, and aluminum and trade tensions with the United States weighed heavily on exports and manufacturing output.
The manufacturing sector, which makes up nearly one-tenth of Canada’s GDP, contracted 0.5% in August — reflecting ongoing tariff impacts and weakening global demand.
The mining, quarrying, and oil and gas extraction industries saw the steepest decline, down 0.7%, driven by a 1.2% drop in metal ore mining and a 5% fall in coal mining.
Services Sector Mixed
In services, transportation and warehousing output fell due to an airline strike, and wholesale trade also slowed.
Still, retail trade, along with real estate and leasing, posted modest gains that helped cushion the overall downturn.
Outlook
Economists say that while August’s contraction underscores the fragility of Canada’s economy, the modest rebound expected in September could help stave off a technical recession — at least for now.
StatsCan will release the final third-quarter GDP figures later this year, providing a clearer picture of whether Canada’s economic slowdown is stabilizing or deepening.
