Stagnant Growth & Sectoral Shifts: Canada's July GDP Announcement

Canada's Gross Domestic Product (GDP)  announcement for July was highly anticipated, as it carried the potential to signal a recession in the country.

The dictionary defines a recession as "a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters," a negative GDP growth would have raised alarm bells.

However, the July figures revealed that Canada's GDP remained flat, falling short of economists’ expectations for a 0.1% expansion. The most significant setback came from the manufacturing sector, which contracted by 1.5%, its largest decline in over two years. Meanwhile, various service industries, including agriculture, transportation, retail, and professional services, also shrank.

In a more favorable turn, the mining and oil and gas sector rebounded after June's setbacks due to forest fires. Other sectors including accommodation and food services also showed growth in July despite challenges such as port strikes. 

However, early indicators for August suggest continued weak growth, with a projected expansion of just 0.1%. According to Stephen Brown, an economist at Capital Economics, there is a growing apprehension that should employment figures decline in the upcoming quarter, Canada might be at risk of slipping into a recession.

The contrasting performances of these sectors highlight the challenges faced by Canada's economy, including supply chain disruptions, labour shortages, and shifting consumer behavior. Policymakers must take proactive measures to address these issues and support struggling sectors to ensure Canada's economic resilience and stability in the face of recessionary risks.

Mark your calendars for October 31, 2023, when the next scheduled announcement will provide updated estimates alongside the official GDP by industry data for August.

If you have any questions about today’s Market Update, feel free to call us at 604-643-0101 or email cashgroup@cgf.com.