MNI: Canada GDP Flat For Fourth Straight Month in August

Canada's gross domestic product was little changed over a fourth consecutive month in August, evidence that rapid inflation, rising interest rates and frayed global supply chains are taking their toll. 

Statistics Canada said Thursday preliminary tracking showed gains in retail and wholesale trade were offset by declines in manufacturing and oil production, leaving August output "essentially unchanged." The official reading for July showed a 0.1% gain, following an identical reading for June and stagnant output in May.

While July's GDP increase beat the economist consensus for a 0.1% decline, third-quarter growth may disappoint the Bank of Canada's forecast for expansion at a 2% annualized pace. RBC, Desjardins and Wells Fargo see a recession over the next year as interest-rate hikes and inflation pinch consumers and the global economy stumbles.

StatsCan also reported separately that average weekly earnings for payroll employees rose to an elevated 2.9% in July from a year earlier. That's still far short of the latest CPI reading of 7%, suggesting households must make some sacrifices. 

The July GDP figures also showed the finance industry was flat after three previous declines as higher interest rates dampened home sales and inflation led people to deposit less cash into savings accounts. Retail sales fell 1.9% to the lowest since December led by food and the failure of lower prices to boost sales at gasoline stations. 

Commodity producers gained in July as they sought to fill demand created by the war in Ukraine. Alberta oil sands production rose to a record after some major outlets finished maintenance work, potash mining grew 3.2% and farm crop production rose 7.2% led by wheat and other grains.

The Bank of Canada has said higher interest rates are needed to slow the economy so supply and demand come back into balance. Investors predict the 3.25% policy rate will rise another half-point at an Oct. 27 meeting, and at least one more move beyond that. Even a recession likely won’t deter the Bank, experts have told MNI, because of the overriding need to pull inflation back to a 2% target.