Canada’s economy stalled for a second month in a row in August and may be set for a decline in September, Statistics Canada said Friday.
StatCan said real gross domestic product was essentially unchanged in August, falling short of economists’ calls and the agency’s own early expectations for a gain of 0.2 per cent.
Wholesale trade fell 1.4 per cent in the month as most subsectors contracted. StatCan said motor vehicle and vehicle parts wholesalers faced their first decline in seven months amid lower vehicle imports and weaker manufacturing activity in the subsector.
Work to prepare the 2026 census was also winding down in the month, driving widespread contractions in public administration.
Strength in mining and quarrying was more than offset by a decline in oil and gas extraction, StatCan said. Oil sands extraction was the biggest drag on growth due to maintenance at some facilities in northern Alberta.
Maintenance outages at nuclear power plants in Ontario and New Brunswick also dragged down the utilities industry in August.
Retail trade was among the bright spots in the month, posting 1.2 per cent growth and more than making up for a decline in July.
Manufacturing rose for the fifth time in seven months, and the transportation and warehousing industry and finance and insurance sector also saw gains in August.
StatCan’s early estimates for September suggest real GDP declined 0.1 per cent, driven by losses in manufacturing and mining, quarrying and oil and gas extraction.
Despite flat growth in July and August and signs of a decline in September, StatCan’s flash estimates still see real GDP expanding 1.3 per cent on an annualized basis in the third quarter, a slowdown from 3.3 per cent growth in the second quarter.
Because the economy was coming off such a robust month in June, it provided a strong starting point for the third quarter. As a result, despite weakened activity over the three-month period, it still produces positive annualized growth when compared to the second quarter’s average.
StatCan will provide its official quarterly estimates for the third quarter next month when it reports the September GDP figures.
BMO chief economist Doug Porter said in a note to clients Friday that some of the weakness last quarter might be overstated, particularly as it relates to census-related slowdowns.
“Still, with the trade tiff still flaring, housing struggling, and recent employment figures concerning, it certainly appears that growth has run into some pretty serious headwinds of late,” he said.
The latest economic data comes two days after the Bank of Canada raised its benchmark interest rate by a quarter point to 2.5 per cent, the first hike in more than three years.
Officials at the central bank argued that rate hikes were warranted to get ahead of looming inflation risks. Governor Tiff Macklem pointed to signs of resilience in the Canadian economy over the spring in justifying the decision.
The central bank also revised up its expectations for growth on Wednesday. Monetary policymakers are expecting growth in the third quarter ended up at two per cent on an annualized basis, up from 1.5 per cent in its July forecasts.
Many economists weighing in Friday argued the Bank of Canada’s somewhat rosier projections are at risk after StatCan data suggested middling growth in the third quarter.
BMO, which had been in line with the central bank’s call for two per cent growth, trimmed its outlook to 1.5 per cent after Friday’s surprise.
Andrew Grantham, senior economist at CIBC, said in a note that the data suggested the economy “was already struggling for momentum even before this week’s interest rate hike.”
A slower-than-expected economy could help relieve inflationary pressures and reduce the need for additional rate hikes, he added.
The weak GDP results support a pause from the Bank of Canada at its final rate decision of the year in December, Grantham said, though he noted there’s plenty of additional economic data to come before that meeting.
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Craig Lord, The Canadian Press
This report by The Canadian Press was first published Oct. 30, 2026.
