Economists flag Q3 downside as Canada’s GDP stalls in August
The composition of August was mixed. Retail activity rose sharply, suggesting resilient household spending despite higher borrowing and energy costs.
Manufacturing output and engineering construction also gained, while wholesale trade, public administration, and oil and gas extraction all declined.
Statistics Canada reported no growth in August GDP and an estimated decline in September, suggesting third-quarter growth may fall short of the Bank of Canada’s expectations following its latest interest rate increase. https://t.co/CCruoYeDlc
— Canadian Mortgage Professional Magazine (@CMPmagazine) October 30, 2026
Mixed signals for the central bank
On October 28, the Bank of Canada raised its overnight rate by 25 basis points to 2.50%, its first hike since July 2023. Economists characterized the move as risk management, though softer GDP data complicates that framing.
Marc Ercolao, economist at TD Economics in Toronto, wrote that August’s result “may cast a little more doubt around the durability of the recovery heading into 2027,” noting that softer fourth-quarter momentum “raises the bar” for the Bank’s 2027 growth forecast, “particularly with trade uncertainty and higher energy costs still clouding the outlook.”
Andrew Grantham, senior economist at CIBC Economics in Toronto, offered a blunter take. August data, he wrote, showed that “all of the growth in Q3 came from the strong handoff at the end of the second quarter, and that throughout the period the economy actually stagnated.”
