Canada’s economy was flat in August as high interest rates continued to weigh on consumers and businesses, although early forecasts suggested it would grow at an annual rate of 1% in the third quarter.
Growth in services-producing industries in August was offset by a decline in goods-producing industries, Statistics Canada’s gross domestic product report released Thursday said.
Manufacturing was the biggest drag on the economy, followed by utilities, wholesale and trade, and transportation and warehousing.
The report noted that the closure of Canada’s two major railways contributed to the decline in transportation and warehousing.
Despite slowing growth in August, preliminary estimates indicate the economy is likely to record a significant recovery in September, with preliminary estimates showing real gross domestic product grew by 0.3% in the month. It has been shown that
Meanwhile, Statistics Canada’s third-quarter forecast is lower than the Bank of Canada’s annualized rate of 1.5%.
Economic downturn gives BOC room to continue cuts
The latest economic data suggests Canada’s economy remains weak, giving the central bank room to continue cutting interest rates.
However, the size of the rate cut remains uncertain, with more data on inflation and the economy expected to be released before the Bank of Canada’s next interest rate decision on Dec. 11.
“I don’t think this is a wake-up call to the world.” [Bank of Canada] But it further emphasizes their concerns about the economic downturn,” TD economist Mark Ercolao wrote.
The central bank has repeatedly acknowledged that the economy is weak and needs to revive growth.
The Bank of Canada cut interest rates by 0.5 percentage point last week after inflation returned to its 2% target.
Governor Tiff Macklem did not say whether the central bank would cut rates by another half point in December, instead saying the central bank would make interest rate decisions all at once based on future economic data.
The central bank expects economic growth to pick up next year as the interest rate cuts spread through the economy.
