Marginal growth reduces prospect of further rate hikes
The national economy posted growth of just 0.1% in August despite rebounding slightly, a sluggish performance that strengthens the case for the Bank of Canada to maintain its pause on interest rate hikes.
The latest gross domestic product (GDP) figures, released by Statistics Canada on Friday, showed little change from a flat reading the previous month in a sign that the economy continues to soften largely in line with central bank expectations.
The wholesale and finance sectors registered stronger performances on a monthly basis in August, although that was offset in part by declines on the retail and oil and gas fronts.
The manufacturing sector saw GDP fall for the second straight month in a 1.5% decline, while service industries inched upwards by 0.1% and goods-producing sectors dipped by 0.3%.
StatCan’s latest figures, which mark the last GDP release before the central bank reveals its next decision on interest rates on October 25, suggest that the economy has cooled substantially in the face of the Bank’s series of aggressive hikes in recent times.
Canada’s economy expanded at a clip of 2.6% in the first quarter of this year – but is now expected to grow at an annualized rate of just 0.2% in Q3 if September’s figures fall largely in line with those of the last two months.
The consumer price index (CPI), a key measure of inflation, jumped to 4% at last reading, although it has slipped well below the 39-year high of 8.1% registered last June.