Canadian Monthly GDP (August 2025)

Canada's economy cooled in August

• Canadian GDP contracted by 0.3% m/m in August, against consensus expectations of no growth.
• Compositionally, 12 of 20 industries registered a decline on the month. Goods industries (-0.6% m/m) reversed out last month's hefty gain, while the services sector nudged down by -0.1% m/m.
• On the goods side, the mining, oil & gas sector lost some steam (-0.7% m/m) after a three-month string of gains. A -0.5% m/m contraction in the manufacturing sector also contributed to the broad-based slowdown in goods sectors.
• On the services side, the airline strike activity pushed air transportation lower by 4.6% m/m in August. Meanwhile, wholesale trade declined by 1.2% m/m in August, dragged down by activity in the motor vehicles and parts wholesales subcategory. Retail trade, up 0.9% m/m, offset some of the drag.
• Advanced guidance calls for a slight uptick in September GDP (0.1% m/m). Increases in the finance and insurance, energy, and manufacturing sectors are expected to be partially offset by activity in wholesale and retail trade.

Key Implications

• Tariff-impacted industries remain under pressure from trade-related challenges. While consumption and domestic demand have shown some stability, third-quarter GDP growth is tracking a paltry 0.4% annualized, consistent with our forecasts and the Bank of Canada's recent October MPR. Official expenditure-based GDP measurement faces heightened uncertainty as next month's trade data will be unavailable due to the U.S. government shutdown. 
• The BoC has acknowledged that trade-related impacts on inflation and economic growth are become more clear. We'd agree, though that doesn't lower the level of uncertainty in coming quarters as Canada and the U.S. continue to work on hammering out a trade deal. For now, the growth backdrop is expected to remain weak and gradually recover over the medium-term. As such, we maintain our view that the BoC has reached the end of their interest rate easing cycle after delivering a 25 bps cut this week.            

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