Canadian Monthly GDP (August 2024)

Canada's economy flatlined in August, with a pickup expected in September

• Canadian economic growth stalled in August after modest GDP growth in July. This print landed in line of Statistics Canada's advanced guidance and consensus expectations. Early estimates from Statistics Canada point to decent growth in September (0.3% m/m).
• August's reading was broad-based, with output expanding in 12 of 20 industries. A 0.1% m/m gain in the services sector offset the drag in goods-producing industries (-0.4% m/m). 
• On a weighted basis, the manufacturing sector posed the biggest headwind for August activity, falling 1.2% m/m with most subcomponents also seeing declines. Elsewhere on the goods side, mining/quarrying/oil & gas (+0.6% m/m) and construction activity (0.3% m/m) rebounded from their declines in July.
• On the services side, August's rail strike led to a 7.7% m/m drop in rail transportation activity, extending losses from July's wildfire-induced slide in rail activity. The public administration sector was up for a fourth consecutive month (0.5% m/m), while finance and insurance (0.5% m/m) and retail trade (0.6% m/m) also helped push the overall services sector into positive territory.
• Behind the advanced reading of a pickup in growth in September is an increase in the finance and insurance sector as well as construction and retail trade. Weaker expected activity in the mining/oil & gas sector offset some of the growth. 

Key Implications

• Today's 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).
• 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.            

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