Canada's Economy Shrinks Unexpectedly
OTTAWA--The Canadian economy shrank unexpectedly in August for the first time since the end of last year, dragged by lower energy and manufacturing output.
The decline marks the second consecutive disappointing month after output stalled in July and is the worst back-to- back showing in almost two years.
Monthly gross domestic product, the sum total of goods and services produced in the economy, dropped 0.1% in August, Statistics Canada said Friday. The year-on-year pace slowed to 2.2% from 2.5% in July.
Market expectations had been for monthly GDP to stall for a second consecutive month, and a year-over-year rate of 2.3%, according to a report from Royal Bank of Canada.
The Canadian dollar weakened sharply on the soft reading.
The latest data suggest third-quarter growth may be lower than the 2.3% annualized rate forecast by the Bank of Canada, and will substantially lag the 3.5% growth reported in the U.S. It also underscores expectations for the Canadian central bank to hold off raising interest rates until sometime in the second half of next year, and likely lagging the U.S. Federal Reserve.
The figures indicate third-quarter growth is tracking around 2% in annualized terms, said David Tulk, chief Canada macro strategist at TD Securities, who had on Wednesday flagged downside risk to the August figure and pushed back his prediction for rate hikes.
The Canadian economy is "definitely a little bit sluggish" compared with the U.S., he said, and the August figures point to the Bank of Canada staying on hold "for a while."
Mr. Tulk now sees the central bank only raising rates in October of next year, later than his previous prediction for the first increase in July, 2015.
The goods-producing sector was behind the decline in August GDP, with output falling 1% due to declines in major industries.
Oil and gas extraction fell for a second straight month, slumping 2.5%. Production was affected by maintenance activities, Statistics Canada said, noting that output still remains at a high level, having increased in seven of the eight months prior to the declines.
Manufacturing output fell 1.2%, the first drop in four months and the largest since last December, weighed down by declines in the auto sector. Construction output shrank 0.5% due to lower residential building and repair work. Lower crop production drove agriculture output down 2.4%.
Output in the services-producing sector rose 0.2%, bolstered by gains in the public sector, wholesale trade and finance and insurance.
Write to Nirmala Menon at nirmala.menon@wsj.com
Canada's Economy Shrinks Unexpectedly - NASDAQ.com
OTTAWA--The Canadian economy shrank unexpectedly in August for the first time since the end of last year, dragged by lower energy and manufacturing output.
The decline marks the second consecutive disappointing month after output stalled in July and is the worst back-to- back showing in almost two years.
Monthly gross domestic product, the sum total of goods and services produced in the economy, dropped 0.1% in August, Statistics Canada said Friday. The year-on-year pace slowed to 2.2% from 2.5% in July.
Market expectations had been for monthly GDP to stall for a second consecutive month, and a year-over-year rate of 2.3%, according to a report from Royal Bank of Canada.
The Canadian dollar weakened sharply on the soft reading.
The latest data suggest third-quarter growth may be lower than the 2.3% annualized rate forecast by the Bank of Canada, and will substantially lag the 3.5% growth reported in the U.S. It also underscores expectations for the Canadian central bank to hold off raising interest rates until sometime in the second half of next year, and likely lagging the U.S. Federal Reserve.
The figures indicate third-quarter growth is tracking around 2% in annualized terms, said David Tulk, chief Canada macro strategist at TD Securities, who had on Wednesday flagged downside risk to the August figure and pushed back his prediction for rate hikes.
The Canadian economy is "definitely a little bit sluggish" compared with the U.S., he said, and the August figures point to the Bank of Canada staying on hold "for a while."
Mr. Tulk now sees the central bank only raising rates in October of next year, later than his previous prediction for the first increase in July, 2015.
The goods-producing sector was behind the decline in August GDP, with output falling 1% due to declines in major industries.
Oil and gas extraction fell for a second straight month, slumping 2.5%. Production was affected by maintenance activities, Statistics Canada said, noting that output still remains at a high level, having increased in seven of the eight months prior to the declines.
Manufacturing output fell 1.2%, the first drop in four months and the largest since last December, weighed down by declines in the auto sector. Construction output shrank 0.5% due to lower residential building and repair work. Lower crop production drove agriculture output down 2.4%.
Output in the services-producing sector rose 0.2%, bolstered by gains in the public sector, wholesale trade and finance and insurance.
Write to Nirmala Menon at nirmala.menon@wsj.com
Canada's Economy Shrinks Unexpectedly - NASDAQ.com
