The Canadian Economy Just Shrank Unexpectedly

Canada’s economy unexpectedly contracted in August, adding to signs of cooling following a torrid pace of growth in the first half of this year.

Highlights of August GDP Report

  • Canada’s GDP shrank 0.1% versus estimates for a 0.1% gain. It was the first monthly decline since Oct. 2016 and follows a flat reading in July
  • Drop was led by across-the-board weakness in goods-producing industries, including a 1% fall in manufacturing and a 1.4% decline in oil and gas
  • Statistics Canada cites maintenance shutdowns in manufacturing and conventional oil for decline
  • Key Takeaways

    Most analysts are anticipating a slowdown in the second half of this year after growth was running at a 4 percent clip in the first six months of 2017. Tuesday’s numbers suggest the potential of a more pronounced drop than expected.

    If the economy fails to post gains in September, third quarter annualized growth would be on pace for a sub-2 percent increase. Economists surveyed by Bloomberg News are forecasting growth to average 2.1 percent in the second half.

    Other Details

  • There were positives in the data, with 12 out of 20 subsectors posting gains. Services-producing industries posted a 0.1% increase
  • Non-durable manufacturing fell 2%, with chemical producers posting a 7.3% drop, the largest in the last 20 years. Statistics Canada cited “plant maintenance shutdowns and lower demand from export markets” for the drop
  • Shutdowns in Newfoundland impacted conventional oil and gas production, which was down 5.2% in August.
    The real estate broker industry posted its first gain in five months, up 0.3%. Wholesalers were another source of strength, with that sector up 0.4%
  • Bloomberg

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