Important sectors see decline for second consecutive month
The Canadian economy experienced a standstill in August, with real gross domestic product (GDP) remaining essentially unchanged following a slight increase in July. This stagnation, indicated in the recent GDP report from Statistics Canada (StatCan), is attributed mainly to a decline in goods-producing industries, offsetting a modest gain in the service sector.
Manufacturing was the biggest drag on the economy, contracting by 1.2% in August. Both durable and non-durable goods manufacturing contributed to this decline, with the latter experiencing its most significant decrease since March 2024. Notably, the transportation equipment manufacturing sector continued its downward trend, reaching its lowest point since September 2021. StatCan noted this decline can be partly attributed to retooling and maintenance activities occurring at multiple auto plants, including an extended maintenance shutdown in Ontario that impacted motor vehicle and parts manufacturing.
The transportation and warehousing sector also contracted for the second consecutive month, primarily due to work stoppages at Canada’s two major rail carriers. These stoppages, along with a bridge collapse in Ontario, caused significant disruptions to the movement of goods across the country, StatCan noted. The rail lockouts led to decreases in intermodal and non-intermodal carloadings, impacting the transport of various commodities ranging from meat and medicine to chlorine and forestry products. The bridge collapse further exacerbated the situation, leaving railcars unable to move goods into the port of Thunder Bay, particularly grain.
Despite these challenges, there were some bright spots in the Canadian economy. The services-producing industries edged up 0.1%, fueled by growth in finance and insurance and public administration. The finance sector benefited from heightened market volatility early in the month, which led to increased trading activity on equity and fixed-income markets.
Overall, 12 of 20 industrial sectors expanded in August, but the declines in key areas like manufacturing and transportation prevented any significant economic growth.
Looking ahead, an advance estimate suggested that real GDP increased by 0.3% in September, driven by gains in finance and insurance, construction, and retail trade. However, decreases in the mining and oil and gas extraction sectors partially offset these gains.
The official estimate for September’s GDP will be released on November 29th, providing a clearer picture of the Canadian economy’s trajectory as the year draws to a close.
