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Canada’s economy is likely to miss the Bank of Canada’s revised third-quarter forecast after a slew of temporary factors stalled gross domestic product growth in August, data showed on Thursday, at a time when business output was already anemic.
Economic growth for July also was revised downwards to 0.1 per cent from 0.2 per cent, Statistics Canada said, and added that preliminary data showed growth is likely to have rebounded to 0.3 per cent in September.
All this together translates to a 1.0 per cent annualized growth in the third quarter, lower than the Canadian central bank’s estimate of 1.5 per cent, a forecast that had already been revised down earlier this month.
StatCan’s quarterly GDP figures are based on Canada’s industrial output, while the third-quarter figure, which is due to be released next month, will be based on a calculation of income and expenditure.
The flat GDP reading for August matched the median forecast of analysts polled by Reuters.
Canada’s economic growth has slowed under the weight of high borrowing costs, which have throttled business investments and output and consumer demand.
Goods-producing industries contracted by 0.4 per cent in August, reaching their lowest level since December 2021, StatCan said, with the manufacturing sector declining by 1.2 per cent and contributing the most to GDP for that month.
“Durable goods manufacturing continued the downward trend that began in the summer of 2023 and decreased 1.0 per cent in August 2024,” the agency said, adding that activity was at its lowest level since September 2021.
Temporary factors such as work stoppages at Canada’s two biggest rail companies and maintenance at car manufacturing factories added to the lackluster figure.
“These data support our call for another 50-bp (basis point) cut at the (Bank of Canada’s) next meeting in an effort to try and accelerate growth and reduce slack in the economy,” Andrew Grantham, senior economist at CIBC, wrote in a note.
Canada’s central bank has said it wants the economy to strengthen and has cut its key interest rate four times in a row to 3.75 per cent to spur growth after inflation returned to its 1 per cent-3 per cent control range.
Money markets increased bets for another 50-basis-point rate cut in December to more than a 25 per cent probability from roughly 18 per cent before the release of the GDP data.
The Canadian dollar edged up, with the loonie trading 0.06 per cent higher at 1.3893 to the U.S. dollar, or 71.98 U.S. cents.
Bond yields for two-year Canadian government bonds CA2YT=RR fell 0.9 basis points to 3.169 per cent.
The Bank of Canada will have the chance to pore over another GDP report, inflation data for October and two job reports before its next monetary policy decision announcement on Dec. 11.
(Reporting by Ismail and Promit Mukherjee in Ottawa; Additional reporting by Dale Smith; Editing by Jane Merriman and Paul Simao)
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