A Second Month of Meagre Growth

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Ottawa, October 22nd, 2019—The Conference Board of Canada’s Economist Aimee McArthur-Gupta offers the following insights on today's GDP release:

We now have two months of real GDP data for the third quarter—and it’s safe to say, the third quarter is shaping up to be a slow one. Following a strong second quarter performance, growth stagnated in July and now the most recent data release brings just a small uptick of 0.1 per cent for August.

Insights

  • After growing strongly for four consecutive months, real GDP slowed down over the summer months. July’s real GDP growth fell flat, while August saw a small improvement at 0.1 per cent.
  • Compared to August 2018, real GDP is up 1.3 per cent year-on-year. That is a relatively slow pace of growth and means the economy is now growing slower than its potential.
  • Goods-producing industries—like mining, manufacturing, and construction—saw positive, albeit weak, growth following two months of declines. While, services-producing industries—such as wholesale trade, retail trade, and real estate—saw similar growth at 0.1 per cent.
  • The strong GDP growth we saw in the second quarter was supported by a large boost in energy exports. With two months of data from the third quarter now in hand, a repeat performance continues to seem unlikely. Oil and gas extraction activity declined 1.6 per cent in August. That falls at the heels of the conventional side of the market’s biggest decline in a decade, which occurred in July.
  • Wholesale trade fell by 1.3 per cent in August, which more than erased the gains seen in July.
  • At 0.3 per cent, retail trade continued at a more moderate pace of growth than we saw in the second quarter. Professional services also continued its growth streak.
  • This morning’s GDP report is in line with our most recent forecast that projects economic growth to slow for the remainder of the year. The second quarter growth was due to a pickup in energy exports, but the energy sector’s performance so far in the third quarter confirms that pace is unsustainable.
  • With GDP now growing slower than potential, the case continues to build for the Bank of Canada to cut interest rates early next year.

Aimee McArthur-Gupta

Economist

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