Canada's economy contracted in August amid widespread expectations of stagnant growth, Statistics Canada data showed Friday, but preliminary estimates indicate the economy could avoid recession in the third quarter.
The economy contracted 0.3 per cent in August after an upwardly revised report of 0.3 per cent growth in the previous month, Statistics Canada said, effectively offsetting any gains in the current quarter.
It was the fourth monthly contraction in five months and was driven by a fall in output in both the services and goods sectors, it said.
A preliminary indicator suggested monthly GDP would likely increase 0.1 percent in September, bringing overall third-quarter annual growth to 0.4 percent, missing the Bank of Canada's forecast.
Preliminary estimates are not always accurate and may change. The quarterly annualized estimate is based on industrial production data, and StatsCan will publish quarterly annualized GDP based on income and expenses.
The likely third-quarter growth, which is broadly dependent on higher output in September, means Canada could avoid a recession in the third quarter.
Two quarterly contractions in a row are considered a recession.
Tariffs continue to hit the economy
Canada's GDP contracted 1.6 percent in the second quarter as the impact of tariffs on steel, autos, lumber and aluminum and general trade uncertainty reduced exports and hurt economic growth.
The Bank of Canada said this week that annual GDP in the third quarter will likely be 0.5 percent.
The manufacturing sector, which has been hit hardest by US tariffs and accounts for nearly a tenth of GDP, contracted 0.5% in August, data from the statistics agency showed.
However, the biggest decline was seen in mining, quarrying and oil and gas production, which fell 0.7%, mainly due to a 1.2% drop in metal ore production and a 5% drop in coal production, Statistics Canada said.
Among the services sector, the main cuts were in transport and warehousing, partly due to the airline strike, and in wholesale trade.
However, growth in retail and real estate, as well as rental and leasing, helped partially offset the decline in the services sector.
