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Canada's economic growth weaker than expected

·2-min read
Growth was driven by accommodation and food services, retail trade and transportation amid further loosening of public health restrictions. (REUTERS)
Growth was driven by accommodation and food services, retail trade and transportation amid further loosening of public health restrictions. (REUTERS)

Canada's economy grew 0.4 per cent in August, less than the 0.7 per cent economists expected.

Statistics Canada says accommodation and food services, retail trade, and transportation continued to rebound after health restrictions were lifted.

After steep declines during the pandemic, air transportation jumped 24.2 per cent as more planes carrying passengers and cargo took to the sky.

The accommodation services subsector rose 11.3 per cent with record gains in traveller accommodation, recreational vehicle parks and recreational camps, and rooming and boarding houses.

As restaurants and bars opened their doors to more customers, food services and drinking places rose 5.4 per cent after an 8.1 per cent gain in July.

Gains were widespread, with growth in 15 out of the 20 industrial sectors. There was a 0.1 per cent decline in goods-producing industries. Record heat and drought conditions in Western Canada led to a 5.7 per cent drop in agriculture, forestry, and fishing and hunting.

Economic weakness ahead

Statistics Canada's early estimate points to real GDP being unchanged in September.

“Together, that has GDP by industry for the quarter running at just under a 2% annualized clip, against Bank of Canada expectations for a 5.5% pace for GDP on an expenditure basis,” said CIBC chief economist Avery Shenfeld.

“While these two measures can differ, the risks tilt toward a second consecutive quarter in which the central bank’s outlook was on the high side.”

Shenfeld says while inflation is the Bank of Canada’s focus, weaker than expected GDP growth is one piece of evidence against an aggressive tightening cycle. 

The Bank of Canada moved up projections for the next interest rate hike on Wednesday.

Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains.

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