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GDP Flat Again in August

Canadian Economics

By: Viktor Cicman

    

Real gross domestic product (GDP) was essentially unchanged in August, for the second consecutive month, as 11 of the 20 industrial sectors saw a decline or no growth.

  • The services-producing industries edged down 0.1 per cent per cent in August, with retail trade leading growth for the month. The sector rose 1.2 per cent in August, more than offsetting the contraction in July.
  • Within retail, sales at motor vehicle and parts dealers rebounded by 1.8 per cent in August, supported by stronger activity at new car dealers and more than reversing the decline recorded in July.
  • Wholesale trade saw the largest decline in August. The sector fell by 1.4 per cent with motor vehicle and motor vehicle parts and accessories wholesalers leading the drop at 4.4 per cent. However, this is the first time the industry contracted in seven months.
  • The public sector also weighed on growth, falling by 0.2 per cent and marking its first decline in six months. Federal government public administration fell by 2.1 per cent as work on the 2026 Census continued to wind down.
  • Mining, quarrying, and oil and gas extraction was flat in August. Oil and gas extraction declined by 1.2 per cent, marking a third consecutive monthly decrease. The downturn was largely driven by a drop in oil sands extraction, as maintenance work at several mining facilities in northern Alberta weighed on production.
  • The good news is mining and quarrying (except oil and gas) posted the largest monthly growth rate since July 2025, rising by 4.9 per cent as some operations that were experiencing production disruptions rebounded. Potash mining expanded 12.0 per cent, and other metal ore mining a substantial 56.2 per cent, as extraction and ores processing in northern Saskatchewan resumed following production disruptions.
  • The manufacturing sector performed well in August as a whole, expanding 0.3 per cent. Petroleum refineries rose 4.2 per cent, as increased activity in the industry coincided with a sharp increase in exports of refined petroleum energy products. However, Transportation equipment manufacturing decreased 3.1 per cent in August, as a prolonged summer shutdown at a major auto assembly plant dampened activity in the industry.

Key insights

Canada’s economy has stalled, with GDP remaining flat for two consecutive months. Advanced estimates for September suggest the economy grew by an annualized 1.3 per cent in the third quarter, significantly lower than the 3.1 per cent gain recorded for the second quarter. Export activity remained a source of strength. Canada’s merchandise exports rose 2.5 per cent in August, driven by gains in energy products, machinery, and consumer goods, contributing to a widening trade surplus. However, labour market conditions softened. Employment declined in both August and September and the national unemployment rate ticked up to 6.5 per cent in September. Inflation has also remained in the 3 per cent range, largely reflecting higher gasoline prices, putting additional pressure on household budgets and likely weighing on consumer spending.

Looking ahead, the Canadian economy is expected to remain on a modest growth path through the end of 2026 and into 2027. A softer labour market and continued pressure on household budgets are likely to restrain domestic demand. In addition, ongoing trade tensions and U.S. tariffs continue to create uncertainty for Canadian manufacturers and exporters, potentially delaying investment and hiring decisions. While Canada’s economy has remained relatively resilient thus far, soft domestic demand, rising borrowing costs and uncertainty surrounding the trade environment are likely to remain important headwinds in the coming quarters.

To learn more about Canada’s economic outlooks for the long-term or the next five years, please visit Signal49 Research’s Canadian Outlook.

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