- Prior was +0.2%
- Advance Sept GDP +0.3% m/m
- August GDP unchanged (0.0%) vs +0.1% in July
- Manufacturing sector drops 1.2%, biggest drag on growth
- Rail transportation tumbles 7.7% due to lockouts at major carriers
- Finance sector up 0.5% on market volatility and trading activity
The advanced Sept number is a nice improvement and has given a small lift to the Canadian dollar.
For August, the Canadian economy stalled as manufacturing weakness and transportation disruptions offset gains in services. The flat reading followed a modest 0.1% gain in July. Manufacturing was the biggest disappointment, falling 1.2% with both durable and non-durable goods taking hits. Auto plants faced extended maintenance shutdowns while pharmaceutical manufacturing plunged 10.3%.
Rail transportation was another weak spot, diving 7.7% as work stoppages at CN and CP Rail disrupted shipments. A bridge collapse in Ontario’s Thunder Bay port added to logistics headaches.
The reversal of some of those factors is what likely boosted September with finance, construction and retail leading gains. This suggests Q3 GDP growth of around 0.2%.
There are signs of resilience in services but with inflation below target and growth stagnant, the Bank of Canada needs the overnight rate well below 3.75% and shouldn’t hesitate to continue cutting by 50 bps, though right now pricing only suggests a 23% chance of a larger cut.