Canada's real gross domestic product was unchanged in August, coming in at 0.0% month over month against an estimate of 0.2%, according to Statistics Canada's gross domestic product (GDP) by industry report. The flat reading followed 0.0% in the prior month, leaving the economy stalled for a second consecutive month.

Key figures for August

• August real GDP: 0.0% month over month (prior month: 0.0%)
• September advance estimate: -0.1% month over month
• Q3 preliminary growth indication: +0.3% quarter over quarter, not annualized
• Breadth: 9 of 20 industrial sectors expanded in August
• Services-producing industries: -0.1%
• Goods-producing industries: +0.1%

Sector detail

• Retail trade: +1.2%, led by motor vehicle and parts dealers
• Manufacturing: +0.3%, supported by machinery and petroleum refining
• Wholesale trade: -1.4%, the largest drag on growth
• Public sector: -0.2%, partly reflecting the winding down of Census work
• Oil and gas extraction: -1.2%, a third consecutive monthly decline
• Utilities: -0.4%, weighed down by nuclear maintenance outages

August's flat headline masked considerable movement underneath. Retail trade rebounded 1.2%, more than reversing July's contraction, while machinery production and a recovery in petroleum refining supported manufacturing. Those gains were offset by weaker wholesale trade, lower public-sector activity and another decline in oil and gas extraction. Auto production was particularly weak, with motor vehicles and parts manufacturing down 5.8% amid a prolonged summer plant shutdown.

The softer detail came in the forward estimate: output is projected to have declined 0.1% in September, suggesting the economy lost momentum heading into the end of the third quarter. If the advance estimate holds when final figures are published, Canada will have recorded three straight months without an expansion in output. The industry-based figures point to quarterly growth of 0.3% in Q3, subject to confirmation in the official quarterly release.

Analysis

The analysis accompanying the data noted that two flat months followed by a projected decline suggest an economy struggling to build momentum. The retail rebound was viewed as encouraging, but growth was narrow, with fewer than half of industrial sectors expanding. Some of the weakness reflects maintenance outages, auto plant shutdowns and the winding down of Census activity, which limits how much can be attributed to softer underlying demand.

For the Bank of Canada, the growth figures could strengthen the case for easier policy if inflation allows. GDP by industry is among the core indicators the central bank monitors when setting the policy rate, which is why monthly prints of this kind feed directly into the policy outlook. In isolation, weaker growth would normally weigh on Canadian yields and the Canadian dollar, creating an upward bias for USDCAD. The next checkpoint is November 30, when September GDP and the official third-quarter income-and-expenditure estimates are released — the data that will confirm or revise the advance figures.

What the report measures

GDP by industry tracks inflation-adjusted production across Canada's economy, with monthly changes showing whether activity is expanding or contracting and which industries are driving it. The advance estimate is preliminary and subject to revision; it is published ahead of the full monthly report and can be adjusted as more complete source data arrive. The official quarterly income-and-expenditure report provides a separate measure of overall growth. Quarterly growth in this report is expressed in quarter-over-quarter terms rather than the annualized rates used in U.S. headline figures; the preliminary 0.3% pace for Q3 would work out to roughly 1.2% on an annualized basis.

USDCAD technical note

In the accompanying chart analysis, USDCAD moved lower alongside the U.S. dollar but was bouncing modestly after testing the 61.8% retracement of the move up from the August low, a level that comes in at 1.39497. The pair, however, needs to get and stay above the high of the swing area at 1.3963 to give dip buyers at the 61.8% level some hope.