Is a recession on the way?
Canada’s economy is continuing to slow, with new Statistics Canada data showing gross domestic product (GDP) remained largely unchanged in August and likely September.
The national statistics agency said growth had stayed flat for a second consecutive month, a trend that probably stretched into September according to an advance estimate.
The economy likely shrank at an annualized rate of 0.1% in the third quarter, according to StatCan’s preliminary estimate, in a clear sign that rising interest rates and still-high inflation are weighing down on its performance.
The Bank of Canada has increased its benchmark interest rate 10 times since March of last year, hiking it to a 22-year high of 5% in an effort to combat rampant and persistent consumer price index (CPI) inflation.
Wholesale trade and mining, quarrying, oil and gas extraction all saw growth in August, according to StatCan, while agriculture and forestry, retail and accommodation, manufacturing, and food services contracted.
While inflation remains above the Bank of Canada’s target rate of 2%, the central bank has seen fit to hit pause on rate hikes in its last two announcements, with the economy apparently slowing at a sufficient pace to justify no further action.
If September’s estimate is correct, it would mean the Canadian economy posted no significant growth in the four-month period between May and that month.
In a release shortly after the latest data was revealed, Royal Bank of Canada (RBC) said most signs suggested that the central bank would continue to leave rates unchanged in the coming months.
“The BoC is still concerned about broader inflation pressures running above the 2% target,” wrote assistant chief economist Nathan Janzen, “but evidence continues to build that go-forward inflation pressures are easing as the economic growth backdrop softens.
“We don’t expect additional interest rate hikes from the BoC as long as that continues.”
