The Canadian Economy Just Shrank Unexpectedly

Canada’s economy unexpectedly contracted in August, adding to signs of cooling following a torrid pace of growth in the first half of this year.

Highlights of August GDP Report

  • Canada’s GDP shrank 0.1% versus estimates for a 0.1% gain. It was the first monthly decline since Oct. 2016 and follows a flat reading in July
  • Drop was led by across-the-board weakness in goods-producing industries, including a 1% fall in manufacturing and a 1.4% decline in oil and gas
  • Statistics Canada cites maintenance shutdowns in manufacturing and conventional oil for decline
  • Key Takeaways

    Most analysts are anticipating a slowdown in the second half of this year after growth was running at a 4 percent clip in the first six months of 2017. Tuesday’s numbers suggest the potential of a more pronounced drop than expected.

    If the economy fails to post gains in September, third quarter annualized growth would be on pace for a sub-2 percent increase. Economists surveyed by Bloomberg News are forecasting growth to average 2.1 percent in the second half.

    Other Details

  • There were positives in the data, with 12 out of 20 subsectors posting gains. Services-producing industries posted a 0.1% increase
  • Non-durable manufacturing fell 2%, with chemical producers posting a 7.3% drop, the largest in the last 20 years. Statistics Canada cited “plant maintenance shutdowns and lower demand from export markets” for the drop
  • Shutdowns in Newfoundland impacted conventional oil and gas production, which was down 5.2% in August.
    The real estate broker industry posted its first gain in five months, up 0.3%. Wholesalers were another source of strength, with that sector up 0.4%
  • Bloomberg

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    Dean Popplewell

    Dean Popplewell

    Vice-President of Market Analysis at MarketPulse
    Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
    Dean Popplewell