Canada’s economy unexpectedly contracted in August, according to the report by Statistics Canada, adding to signs of a faster-than-expected cooling following a torrid pace of growth in the first half of this year.
The country’s GDP fell by 0.1% month-on-month in August, following the prior month’s flat reading of 0.0%.
Statistics Canada said that declines in manufacturing and mining, quarrying and oil and gas extraction “more than offset” the increases in other sectors, as goods-producing industries shrank by 0.7%, while services-producing sectors ticked up by 0.1%.
Economists were expecting GDP to pick up by 0.1%.
Last week, the Bank of Canada held rates at 1.00%. The bank said the global and Canadian economies are progressing as outlined earlier this year, but cautioned that its outlook remains “subject to substantial uncertainty about geopolitical developments and fiscal trade policies” — including the on-going NAFTA re-negotiations.
The Canadian dollar dropped as much as 0.6 percent to C$1.2823 against the U.S. dollar after Tuesday’s report, which may fuel concern the Bank of Canada’s caution with raising interest rates will only deepen. Governor Stephen Poloz indicated last week he’s in no rush to cool the economy with further with hikes.
Most analysts are anticipating a slowdown in the second half of this year after growth was running at a 4 percent clip in the first six months of 2017. Tuesday’s numbers suggest there could be a more pronounced drop than expected, according to Bloomberg.
If the economy fails to post gains in September, third quarter annualized growth would be on pace for a sub-2 percent increase. Economists surveyed by Bloomberg News are forecasting growth to average 2.1 percent in the second half.