August 2025 GDP: Skipping candy this year

Canada’s economy slowed noticeably in August, as weaker mining, soft manufacturing, and labour disruptions in the airline sector all weighing on growth. The bright spot is retail, which continues to show impressive resilience. Overall, the economy seems to be expanding at a slower pace than the Bank of Canada expected for the third quarter — reinforcing the Governing Council’s focus on downside risks.

KEY TAKEAWAYS

• Real GDP contracted 0.3% m/m in August, led by goods-producing sectors which declined 0.6%, while services were down only 0.1%. This reverses July’s 0.3% m/m GDP growth, as trade-exposed sectors continue a downward trend in August. The goods economy posted its fifth monthly decline since January, signaling broad-based weakness in manufacturing and industrial output.
• Transportation and warehousing contracted 1.7% in August, reversing all of July’s progress. Specifically, air transportation declined 4.6% due to the flight attendant strike that resulted in flight cancellations. This had supply chain impacts, resulting in a nearly 2% drop in support activities for transportation.
• The mining, quarrying, and oil and gas sector contracted 0.7%, driven by weaker support activities for mining, and oil and gas extraction, metal ore and coal mining. Oil and gas extraction rose 0.2% in August. Utilities contracted 2.3% due to lower electric power generation, transmission, and distribution on lower hydroelectric activity.
• Manufacturing declined 0.5% in August among durable and non-durable manufacturing categories. Durable goods contracted 0.8% led by machinery and fabricated metal products. Alumina and aluminum production surprisingly rose on the month (+9.6%) alongside higher exports to non-U.S. markets.
• Retail trade expanded 0.9%, helping offset broad-based weakness in other areas of the economy. The growth was supported by motor vehicle and parts dealers, merchandise stores, and clothing categories.

IMPLICATIONS

• Statistics Canada’s flash estimate for September GDP is +0.1%, which would put the third quarter on track to grow 0.4% on an annualized basis. The Bank of Canada in their October Monetary Policy Report anticipates Q3 GDP growth of 0.5%. BDL’s nowcast is tracking a more positive quarter, expecting 1.6% growth, but this is expected to be weaker as August GDP data gets fed into the model.
• All together, the Bank of Canada lowering interest rates this week was the right move as downside risks to fall economic growth are mounting. We anticipate subdued growth for the remainder of the year and will monitor how incoming data lines up with the Bank’s outlook.

SUMMARY TABLE

Source: Statistics Canada