OTTAWA – Canada’s economy slowed unexpectedly in August, the first month to show a decline this year.
Economists had expected the economy to remain flat in August, according to Thomson Reuters data, but Statistics Canada reported that gross domestic product declined 0.1 per cent compared with July, which was flat compared with June.
Several economists said the July-September quarter will probably show annualized growth of 2.0 per cent, which would be below the Bank of Canada’s estimate of 2.3 per cent and the May-June quarter’s strong 3.1 per cent growth rate.
“The Canadian economy pretty much took the summer off, with overall output dropping in July and August combined, and managing less than a one per cent annualized growth rate in the past three months,” said Doug Porter, chief economist at Bank of Montreal (TSX:BMO).
“The good news, such as it is, is that the weakness was largely due to a pullback in oil and gas output, partly related to maintenance, and the rest of the economy is still plugging ahead,” said Porter.
Statistics Canada said overall goods production, including the resource and manufacturing sectors, fell 1.0 per cent in August.
The service industries grew 0.2 per cent overall in August, the agency said, with gains in the public sector, wholesale trade and the finance and insurance sector.
Statistics Canada said oil and gas extraction contracted 2.5 per cent in August, following a 1.6 per cent decline in July.
The agency pointed out, however, that oil and gas extraction is still at a high level and had risen in seven of the eight months before the July and August drops.
It also said mining and quarrying increased 2.0 per cent in August on the strength of copper, nickel, lead and zinc mining.
Manufacturing output fell 1.2 per cent in August, after gains in the previous three months. Durable-goods manufacturing fell 1.0 per cent while non-durable goods manfacturing dropped 1.3 per cent.
Nick Exarhos, an economist with CIBC World Markets, said August’s economic softness was foreshadowed by weak auto manufacturing data earlier this month.
“Manufacturing output declined by 1.2 per cent on the month, reversing the prior month’s healthy gain, as unusually low auto factory shutdowns in July cut the other way in the seasonal adjusted figures for August,” he wrote in a note.