Canada's economy was flat in August, below expectations, and likely shrank slightly in the third quarter, according to Statistics Canada data released on Tuesday.
Reuters analysts had even forecast an increase of 0.1% month-on-month in August. July's GDP has been reassessed to be slightly negative from the original report which showed zero growth.
The statistics department said high interest rates, high inflation, forest fires, and drought conditions put pressure on the economy in August. In preliminary estimates, Statscan said the economy was also unchanged in September, meaning a 0.1% decline in the third quarter if translated annually.
Even if it is likely to be reassessed and the figures remain the same, it will be the third consecutive quarter of negative growth after slowing in the three months ending in June.
The Bank of Canada last week lowered its third-quarter annualized GDP growth forecast to 0.8% from the 1.5% forecast in July. The central bank said its 10 interest rate hikes between March 2022 and July 2023 have slowed the economy, and GDP growth is expected to remain low until the end of 2024.
Canada's goods-producing sector shrank by 0.2%, the third straight month of declines in the manufacturing sector.
The services production sector recorded an increase of 0.1%, partly driven by wholesale trade and the transport and storage subsector.
