Statistics Canada is set to release its August gross domestic product report this morning. The Bay Street Financial District is shown with the Canadian flag in Toronto on Friday, August 5, 2022. THE CANADIAN PRESS/Nathan Denette
OTTAWA – The Canadian economy remained flat in August and a preliminary estimate from Statistics Canada suggests it shrank in the third quarter.
The federal agency released Tuesday its August gross domestic product report, which found higher interest rates, inflation, forest fires and drought conditions continued to weigh on the economy.
August marked the second consecutive month where growth remained flat, and an advance estimate suggests the economy continued that trend in September.
For the third quarter, Statistics Canada’s preliminary estimate suggested the economy shrank at an annualized rate of 0.1 per cent, which would follow a contraction in the second quarter.
The report said eight out of 20 industries grew in August, while growth in services-producing sectors was offset by goods-producing sectors.
Among the industries that experienced growth are wholesale trade and mining, quarrying, oil and gas extraction.
Industries such as agriculture and forestry, manufacturing, retail and accommodation and food services shrank.
High interest rates are expected to continue dampening growth in the economy, particularly as more households renew their mortgages at higher rates.
A recent forecast from the Bank of Canada suggests economic growth will remain weak for the rest of the year, and into 2024.
The central bank’s key interest rate target is five per cent, the highest it’s been since 2001.
The pullback in spending caused by higher borrowing costs is supposed to help cool high inflation, which was sitting at 3.8 per cent in September.
The Bank of Canada expects annual inflation will return to the two per cent target in 2025.
This report by The Canadian Press was first published Oct. 31, 2023.
