Output shrank 0.1 percent to an annualized C$1.63 trillion ($1.45 trillion), Statistics Canada said today in Ottawa, while the median forecast in a Bloomberg economist survey with 20 responses was for output to be little changed from July.
Oil and gas extraction declined by 2.5 percent to C$96.9 billion, the second straight decrease, leading the broader drop across goods-producing industries. Output among service producers rose 0.2 percent.
The economy remains hobbled by weak exports and business investment, which Bank of Canada Governor Stephen Poloz says are critical to building the recovery. The central bank extended the longest interest-rate pause since the 1950s this month and said it will take two years to restore full output in the world’s 11th-largest economy.
“Disappointing,” Jimmy Jean, a strategist in the fixed-income group at Desjardins Capital Markets in Montreal, wrote in a research note, noting most of the declines came in goods-producing industries. “The export recovery seems to have hit a stumbling block in the third quarter after a promising first half.”
Canada’s dollar weakened 0.8 percent to C$1.1268 per U.S. dollar at 9:11 a.m. Toronto time.
Below ForecastThe contraction in August is another weakening from the 2014 peak of 0.5 percent growth in May. Economists including Krishen Rangasamy predict third-quarter growth is lagging behind the central bank’s 2.3 percent forecast.
The economy can still rebound later this year on export momentum from faster U.S. growth and the weaker Canadian dollar, said Rangasamy, senior economist at National Bank Financial in Montreal. “The recovery isn’t even so you have months where there are declines, it happens,” he said by telephone. “The big picture is still positive.”
Manufacturing fell by 1.2 percent in August, the first decline in four months, led by motor vehicle parts, plastics and rubber products, Statistics Canada said. Construction fell by 0.5 percent, led by residential work.
Energy production may be curbed in future reports by a recent plunge in global commodity prices, with the central bank predicting that could shave a quarter percentage point off 2015 economic growth.
The output of the public sector rose 0.3 percent in August, while the production of utilities rose 1.7 percent and wholesalers by 0.5 percent.