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Nearing technical recession territory

Canada’s GDP flat again in August

By Rob Roach, ATB Economics 1 November 2023 1 min read

The latest industry-based GDP estimates from Statistics Canada provide further evidence that the Bank of Canada’s interest rate increases are slowing the economy.

National economic output in August was flat compared to July (which was also flat) and the preliminary estimate for September is for another month of no growth.

Looking ahead, there is a chance that GDP could be slightly negative in both the second and the third quarter. We won’t know for sure until Statistics Canada releases quarterly expenditure-based GDP estimates at the end of this month.

Two quarters of negative growth add up to a technical recession. However, the C.D. Howe Institute Business Cycle Council argues we should consider other factors like job losses and unemployment before labeling a slowdown as a recession. The Council, for example, determined that the two quarters of negative growth in early 2015 following the oil price decline did not qualify as a Canadian recession.

Whether it turns out to be a case of mild technical recession or just tepid growth, the weak performance could be enough to convince the Bank of Canada that additional interest rate hikes are not needed to bring inflation back to target. The latest GDP data support our current expectation that the Bank will not need to raise rates again.

Monthly GDP statistics at the provincial level are not available, but output of the national oil and gas extraction subsector rose in August by 1%, its fourth straight increase following spring wildfire and maintenance disruptions. This points to Alberta getting a summer boost  from the energy industry even as other factors weighed on economic activity.

Answer to the previous trivia question: A new record was set at this year’s World Championship Pumpkin Weigh-Off. The winning pumpkin was 2,749 pounds.

Today’s trivia question: What was created by the Maastricht Treaty when it came into effect on November 1, 1993?

Real GDP in Canada was essentially unchanged for a second consecutive month in August 2023

Real GDP in Canada was essentially unchanged for a second consecutive month in August 2023

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