Stalling economy set to miss Bank of Canada forecast
Growth in the Canadian economy remained unchanged in August, putting gross domestic product on track to grow at an annualized rate of just one per cent in the third quarter, Statistics Canada said on Thursday, paving the way for another cut by the Bank of Canada in December.
The third-quarter reading includes an early estimate for growth increasing by 0.3 per cent in September.
The Bank of Canada revised its forecast for third quarter GDP down to 1.5 per cent in its monetary policy report earlier this month, but growth is still on track to fall below that.
Bank of Canada governor Tiff Macklem said policymakers would like to see economic growth strengthen after delivering a 50-basis-point cut to its policy rate last week, bringing the overnight rate down to 3.75 per cent.
Douglas Porter, chief economist at the Bank of Montreal, said the latest GDP growth numbers will favour another cut to interest rates by the central bank, but more data is needed to determine whether it will be a 50- or 25-basis-point cut.
“While far from conclusive, chalk this one up on the dovish side of the ledger,” he said in a note. “However, the Bank of Canada will see another GDP result (the full Q3 report) before next deciding on rates, along with two jobs reports and another CPI, so this less-than-scary reading hardly settles the debate over the next move.”
The goods-producing sector contracted by 0.4 per cent in August, reaching its lowest level since December 2021. Manufacturing led the monthly decline, contracting by 1.2 per cent. Extended maintenance shutdowns in the auto industry in Ontario contributed to the decline, with auto and parts manufacturing decreasing by 1.9 per cent. Other industries that reported declines include utilities (1.9
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