Canada, which is in the middle of an intense diplomatic and commercial discussion with the United States to move forward the stalled all-important trade deal, witnessed its economy slowing down in August, missing market expectations as weakness in wholesale trade and public administration offset gains in retail, manufacturing, and construction.
The latest data, published by Statistics Canada, also indicate a similar slowdown in the third quarter, adding pressure on the North American country’s overall economic outlook.
While Canada’s GDP recorded no growth in August, following a flat reading in July, an advance estimate from the statistics agency suggests GDP could contract by 0.1% in September.
If that forecast holds, annualised real growth by industry for the third quarter would come in at 1.3%, substantially below the Bank of Canada’s latest projection of 2%.
The expected September decline is largely linked by the agency to weakness in manufacturing, mining and quarrying, and oil and gas extraction.
The August figures highlight the uneven performance of Canada’s economy, with growth in goods-producing industries unable to fully offset a contraction in services.
Services-producing industries contracted by 0.1% in August, led by a 1.4% decline in wholesale trade.
The public sector aggregate, which includes educational services, healthcare and social assistance, and public administration, fell by 0.2%. It was the sector’s first decline in six months.
Utilities also recorded a contraction, with activity falling by 0.4%. Electric power generation, transmission, and distribution declined by 0.5%.
However, the goods-producing sector provided some support to overall economic activity.
Statistics Canada saw the sector’s gains largely compensating for the services’ weakness.
Goods-producing industries account for roughly a quarter of Canada’s GDP.
Retail trade increased by 1.2% in August, recovering from the contraction recorded in the previous month.
Manufacturing output rose by 0.3%, marking its fifth increase in seven months. The sector’s performance is particularly important as manufacturers remain among the Canadian industries most exposed to US tariffs.
“Construction activity expanded by 0.2%, while mining, quarrying, and oil and gas extraction recorded no growth during the month,” Statistics Canada stated further.
The weak GDP figures come as Canada continues to face uncertainty over trade relations with its largest trading partner.
Negotiations between Ottawa and Washington to ease US tariffs on Canadian steel and automobiles have made limited progress, according to a Canadian government official familiar with the discussions.
US President Donald Trump widened the trade dispute in August by imposing tariffs of up to 50% on a range of Canadian imports, accusing Canada of treating American goods unfairly. Ottawa responded with retaliatory measures.
Reuters reported on Monday that the two countries were working toward a trade agreement.
However, negotiations on a broader deal stalled in August after Canada withdrew from the negotiating table.
“While discussions have continued, there has been limited progress,” the Canadian official told Reuters, speaking on condition of anonymity.
Canadian Prime Minister Mark Carney said on last Monday that there had been a “slight intensification” in discussions.
One day later, he reiterated that Canada remained prepared to sign an agreement that served the interests of both countries.
“If those deals present themselves, we will pursue them, but we’re not at that position right now,” Carney told reporters.
Washington, meanwhile, has indicated that negotiations are continuing.
A US government official said significant discussions were under way, including between Commerce Secretary Howard Lutnick and Dominic LeBlanc, Canada’s minister responsible for trade with the United States.
The White House said the Office of the US Trade Representative and the Commerce Department were continuing to work together on key trade issues.
Lutnick and US Trade Representative Jamieson Greer have also held discussions with their Canadian counterparts recently.
The stalemate over the trade deal also coincides with the all-important November 3 US midterm elections, with Trump’s Republican Party fighting to retain control of Congress.
Tariffs on Canadian imports have become a point of concern for Republican candidates in border states, who have called for an end to the trade war.
Recent discussions between Ottawa and Washington have focused on tariffs imposed under Section 232 of US trade law, including duties of up to 50% on Canadian steel and 25% on automobiles.
While Trump said a week back that the trade dispute would be resolved “soon,” he didn’t provide much detail. However, realising the struggles faced by his Republican mates in the bordering states, the US President signed an order removing 50% tariffs on certain Canadian agricultural and forestry products, along with a few other imports, a move that could benefit businesses in states such as Maine.