The Canadian economy contracted slightly in August, with gross domestic product showing a decline of 0.3 per cent, according to Statistics Canada.
August’s GDP report offset most of July’s revised economic growth of 0.3 per cent, and was slightly worse than most analysts expected, including Statistics Canada and those at Royal Bank of Canada who were predicting flat or zero per cent growth.
A recession could still be avoided, with GDP expected to rise a total of 0.4 per cent in the third quarter (July through September) compared with a year ago, following a drop of 1.6 per cent in the second quarter.
Two consecutive quarters of negative GDP would be considered a technical recession.
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September’s preliminary report will be released in November and is expected to show GDP rising by 0.1 per cent compared with August.
On Wednesday, the Bank of Canada cut its overnight benchmark interest rate to help boost economic growth and investment, citing the trade war and U.S. tariffs as having “weakened” the economy.
Governor Tiff Macklem also said that for the next few months, there may be minimal, “modest” growth.
“What we’re not forecasting is a sharp downdraft in the Canadian economy with a big rise in the unemployment rate, which is what is typical of recessions,” Macklem told reporters Wednesday.
“If you’re just looking at the quarterly growth profile, our own forecast is positive but very modest in the near term and then picking up.”
— More to come
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