Canada GDP Seen Dipping in September After Two Flat Months — Update

By Robb M. Stewart

OTTAWA--Canada's economy cooled in the latest quarter after activity unexpectedly stalled two months running and early data points to a slight contraction in September.

Gross domestic product was essentially unchanged in August from the month before at 2.372 trillion Canadian dollars, the equivalent of US$1.695 trillion, Statistics Canada said on Friday.

That was softer than the 0.2% expansion expected by economists following a similarly flat result in July.

The national data agency's advance data indicates output edged down 0.1% in September.

Based on the estimate, Canada's economy expanded at an annualized pace of 1.3% in the third quarter after surging back to life the period before.

August's activity reflected a modest 0.1% expansion in activity by goods-producing industries, balancing a 0.1% dip by services producers.

The advance information for September points to declined in manufacturing and mining and oil and gas extraction, partially offset by increases in utilities and recovery in wholesale trade for the month.

The Bank of Canada anticipated economic activity would remain resilient in the third quarter when it opted to raise its policy interest rate for the first time in more than three years this week, focusing instead on persistently high energy prices and risks to inflation. The central bank's revised forecasts projected annualized growth of 2% in the third quarter after a rebound in the second quarter when GDP expanded 3.3%, the fastest pace since the start of 2023.

Official third-quarter GDP data based on more complete data that includes volatile indicators such as inventories will be released at the end of November, when Statistics Canada will also release an estimate for October that will hint at how activity is faring in the final quarter after President Trump's latest tariffs targeting Canadian goods.

Industry accounts for August showed a rebound in retail trade that more than offset a contraction the month before, driven by sales at new car dealers as well as a recovery in food and beverages following back-to-back monthly declines.

Canada's manufacturers continued to show resilience, with activity up for a fifth month in the last seven thanks to machinery manufacturing and the first growth at petroleum refineries in four months as some refineries resumed production after completing unscheduled maintenance in July.

Rail transport also grew strongly, notching the strongest expansion since March 2025, with movements of wheat helped buoy the sector.

Air transportation rose for a fourth consecutive month, coinciding with new seasonal routes to destinations outside the U.S. over the summer by Canadian airlines.

On the flip side, wholesale trade was the biggest weight on the economy in August as motor vehicle and parts wholesalers weakened for the first time in seven months with a fall in imports of passenger cars and light trucks.

There also was a widespread contraction in public administration during the month, the first pull back in six months, led by a fall in federal government activity as work on the 2026 national census continued to wind down.

Mining saw the strongest monthly growth since July 2025, helped by a recovery from recent disruptions by some companies and with a sharp rise in potash mining with an increase in exports. Oil and gas extraction, however, weakened for a third month in row with a decrease in oil sands activity as some facilities in northern Alberta undertook maintenance.

Utilities also retreated in August, led by a contraction in electric power activity as nuclear stations in Ontario and New Brunswick underwent maintenance outages.

Bank of Canada Gov. Tiff Macklem this week said the growth outlook for the country has improved modestly despite the Trump administration's protectionist policies, with exports and business and government investment expected to support a further recovery. Still, the central bank projects growth of 0.8% in annualized terms in the final quarter.

"Growth will likely slow in the fourth quarter as new U.S. tariffs weigh on activity. But growth should pick up again in 2027 as consumer spending continues, exports pick up and business investment strengthens, supported by fiscal measures," Macklem said.

Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

October 30, 2026 09:10 ET (13:10 GMT)