Canadian economic growth cools to 1.2% in August

The Canadian economy grew in August as real gross domestic product rose by 1.2 per cent in August, Statistics Canada reported Friday. 

That marked the fourth straight month of growth following the steepest drops on record back in March and April amid pandemic lockdowns. August’s figure was down from the 3.1 per cent expansion seen in July.

The August number was still ahead of what forecasters had been expecting. According to financial data firm Refinitiv, economists had been predicting growth of 0.9 per cent for the month.

Despite the recent string of growth, overall economic activity is still about five per cent below February’s pre-pandemic level, Statistics Canada said.

September growth is forecast

Preliminary information from Statistics Canada indicates real GDP was up 0.7 per cent in September, with increases seen in the manufacturing and public sectors, as well as in mining, quarrying and oil and gas extraction.

“This advanced estimate points to an approximate 10 per cent increase in real GDP in the third quarter of 2020,” Statistics Canada said. Back in the second quarter, the country’s GDP shrank by 11.5 per cent in the three-month period between April and June. 

Assuming the economy contracts in October and November as a result of a resurgence of coronavirus cases, fourth-quarter GDP looks likely to undershoot the Bank of Canada’s “tepid” forecast for a seasonally adjusted annual rate of one per cent, said CIBC Capital Markets senior economist Royce Mendes.

“It appears that the economy was slowing more than expected heading into the fourth quarter, and the most likely outcome now suggests that GDP barely advanced during the period,” Mendes said in a commentary.

BMO chief economist Doug Porter said the way forward has been deeply clouded by the second wave and renewed restrictions, so growth will cool considerably in the fourth quarter.

“However, we suspect that with ongoing massive fiscal support, less restrictions than earlier, and, simply, that consumers and businesses have learned to operate in this new environment, the late-year setback should be relatively mild,” Porter said. “In fact, we continue to expect modest growth overall for [the fourth quarter].”