Canada’s economy likely stalled by summer’s end, StatCan says

Despite the challenges posed by widespread wildfires in July, the Canadian economy still managed to achieve modest growth, according to data released by Statistics Canada on Friday. However, early projections for August indicate a less optimistic outlook.

Canada's real gross domestic product (GDP) increased by 0.2 per cent in July, slightly exceeding economists’ expectations. The growth was largely driven by services-producing industries, particularly the public sector.

Retail trade experienced the most significant growth in July, rising by a full percentage point—the largest increase in the sector since January 2023. A surge in activity at motor vehicle and parts dealers more than compensated for the declines in June, which had been affected by a technical issue that disrupted dealership sales.

However, the wildfires had negative effects on several industries. For the second consecutive month, the warehousing and transportation sector contracted, with some rail services forced to shut down at the end of July due to wildfires in Jasper National Park and the Rocky Mountains.

In addition, the fires led to the closure of iron ore mines in parts of Labrador and Northern Quebec and caused disruptions to the summer tourism season in Western Canada.

Looking ahead, StatCan's early estimates for August suggest that real GDP was essentially flat, with declines in manufacturing, transportation, and warehousing continuing to weigh on the economy. These preliminary figures will be revised by the end of October.

The July and August figures come after Statistics Canada reported an annualized economic growth of 2.1 per cent in the second quarter. While the Bank of Canada had forecast 2.8 per cent annualized growth for the third quarter, both the central bank and economists have recently cautioned that actual performance may fall short of those projections.