August showed Canada's economy at a standstill, Q3 recession in sight

Posted on November 3, 2023   |  

The Canadian economy faced a slow period in August, raising concerns of a possible mild recession in Q3. 

This slowdown is attributed to the central bank's 10 interest rate hikes over the past year.

August's economic performance fell slightly short of the 0.1% month-over-month growth forecasted by experts. 

Additionally, the GDP for July was adjusted, indicating a small negative growth instead of the initially reported flat growth.

Initial estimates suggest that the economy likely remained stable in September, with an anticipated 0.1% decline in the third quarter when annualized. 

This would mark the 2nd straight quarter of negative growth, following a 0.2% decline in the previous quarter.

Factors like higher interest rates, inflation, forest fires, and drought conditions hurt economic growth in August.

Notably, the projected third-quarter annualized contraction in growth is significantly lower than the Bank of Canada's recent forecast. 

They initially predicted a 0.8% expansion, down from the 1.5% projection in July.

Given these economic challenges, the financial markets expect that the central bank will likely maintain the current interest rates at their next policy announcement in December.