Canada’s GDP Was Flat Again in August, Two Days After the Bank of Canada Raised Rates
Real gross domestic product in Canada was “essentially unchanged in August,” Statistics Canada said Friday morning, and it was the second consecutive month that description applied. Nine of the 20 industrial sectors expanded. The same release carried a preliminary advance estimate for the month after: “Advance information indicates that real GDP decreased 0.1% in September.”
That is the output side of the Canadian economy as of this morning. Two days ago the Bank of Canada raised its policy rate.
The series puts a number on essentially unchanged
Statistics Canada’s own vector for all industries, chained 2017 dollars at seasonally adjusted annual rates, puts August at 2,371,635 millions against July’s 2,371,788. Our arithmetic on those levels gives August at -0.006% on the month and July at +0.026%. Both round to 0.0%, which is what “essentially unchanged” means twice over. Year over year, August was up 1.48%.
One caution applies to any longer comparison. Statistics Canada stated in this release that “revisions have been made back to January 2025,” so every monthly figure published since then may have shifted. The levels above were pulled after the release and are internally consistent with each other, which is the only basis on which a month-over-month figure from this release can be read. Revisions after today land in the agency’s real-time table 36-10-0491-01, which it updates on November 9.
On the quarter, Statistics Canada’s own statement is that the industry data “suggests that the economy expanded 0.3% in the third quarter of 2026.” Our arithmetic on the series, applying the preliminary September advance of -0.1% to the published August level, gives 0.34% over the second quarter, or 1.35% annualized. That annualized figure is our calculation built on a preliminary estimate, not a StatCan published number, and it is built on this release’s measure: GDP by industry at basic prices. The official third-quarter estimate on November 30 is the expenditure-based measure at market prices, and the agency’s own note to readers says that “due to conceptual and statistical differences, GDP by industry and GDP by expenditure percent change estimates can diverge slightly.” The official September reading arrives the same day, alongside an advance estimate for October.
The sectors that made the month, in both directions
The services-producing aggregate edged down 0.1% and the goods-producing grouping edged up 0.1%, which is how a 0.0% month gets built. On the goods side, “expansions in manufacturing and construction more than offset the decline in utilities.”
Wholesale trade fell 1.4% and was the largest detractor to growth, on “widespread contractions across most subsectors.” Motor vehicle and parts wholesalers dropped 4.4%, their first contraction in seven months. Pulling the other way, retail trade rose 1.2%, “more than offsetting the contraction in July,” with motor vehicle and parts dealers up 1.8%. Gasoline stations and fuel vendors were the exception inside retail, down 0.6%.
Manufacturing rose 0.3%, its fifth increase in seven months, and split sharply by industry. Machinery was up 3.8% and petroleum refineries up 4.2%, the first increase there in four months as refineries resumed after unscheduled July maintenance. Transportation equipment fell 3.1%, driven by a 5.8% contraction in motor vehicles and parts, on what the agency described as “a prolonged summer shutdown at a major auto assembly plant.” Motor vehicles and parts manufacturing is the industry Magna International operates in.
Rail transportation grew 3.6%, the largest monthly growth rate since March 2025, on wheat movements following “a record high wheat production for the crop year.” Canadian National Railway and Canadian Pacific Kansas City are the country’s two Class I railways. Finance and insurance added 0.2%, with banking and depository credit intermediation up 0.3% on credit card activity, and the rest of the sector up 0.2% on mutual funds and on “increased gold purchases, as investors hedged against policy risks, trade uncertainties and geopolitical tensions.” The public sector aggregate fell 0.2%, its first decline in six months, with federal public administration except defence down 2.1% as 2026 Census work wound down. Utilities fell 0.4% on nuclear maintenance outages in Ontario and New Brunswick.
The September advance points two of those sectors the other way. Statistics Canada’s advance information has “decreases in manufacturing and mining, quarrying and oil and gas extraction” that “were partially offset by increases in utilities and wholesale trade.” Manufacturing was August’s fifth gain in seven months and wholesale trade was August’s largest single drag, and a month later the two swap sides. That estimate is preliminary and is replaced by the official September data on November 30.
The reason the Bank gave was energy prices, not demand
On Wednesday the Bank of Canada moved its policy rate up 25 basis points to 2.5%, with the Bank Rate at 2.75% and the deposit rate at 2.45%. That was the Bank’s first rate increase since July 2023, and the reason it gave was a single sentence in its press release: “Governing Council decided to increase the policy rate to reduce the risk that continuing high energy prices spread broadly to the prices of other goods and services.” Governor Tiff Macklem named the source of those prices in his opening statement: “With the war in the Middle East persisting, global oil prices have increased and are expected to remain higher for longer.”
Set that beside the inflation data the Bank was looking at. September headline CPI ran at 3.1% year over year, led by gasoline at 27.8%. Excluding gasoline, the index rose 2.2%, and both of the Bank’s own preferred core measures sit below 2%.
So the tightening is not aimed at an overheating domestic economy, and the Bank did not claim it was. The reason it gave was energy prices, not domestic demand. That is the standard dilemma a supply shock sets for a central bank, because a shock of that kind pushes output and inflation to opposite sides of the mandate at the same time, and a 25 basis point increase into an economy that is not growing is a risk-management answer to the inflation side of it. Our own reading is that it leaves this release inside the question the Bank faces on December 9 rather than beside it: whether one relative price spreads broadly into other prices is not independent of how much demand there is to carry it, and the output side is where that shows up.
The release does not show an energy boom in output terms
The complication worth holding onto is that nothing in this data looks like an energy windfall for Canada in volume terms. The mining, quarrying and oil and gas extraction sector was essentially unchanged on the month. Oil and gas extraction fell 1.2%, a third consecutive decline, and oil sands extraction fell 2.1% as facilities in northern Alberta underwent maintenance. What grew was the rest of mining, up 4.9%, with potash up 12.0% after a 7.8% July fall and other metal ore mining up 56.2% as northern Saskatchewan extraction resumed. Nutrien is the dominant Canadian potash producer.
That is consistent with what the Bank actually said. Its concern is the price of energy, not the quantity of energy Canada produced in August. Higher crude prices reach Canadian GDP through revenue rather than through barrels, and this release counts barrels.
Where a rate path and a flat economy meet share prices
A policy rate reaches share prices through the rate applied to future earnings and through those earnings themselves, which is the mechanism our guide to what moves a stock price works through. Both channels are live here, and they are not pointing the same way: the rate side is tightening while the output side is flat.
If the policy rate keeps rising into an economy that is not growing, the groups where the rate side carries the most weight are the ones to look at first. Canadian REITs sit on the rate path twice over: their borrowing costs and the valuation of their property income both key off the rate that moved on Wednesday.
The two dates that resolve this
November 30 brings official September GDP, which replaces this morning’s advance, the official third-quarter estimate on the expenditure measure, and an advance estimate for October.
December 9 is the Bank’s next scheduled decision. As of Thursday, October 29, Montreal Exchange one-month CORRA futures carried 54% implied odds of a hike at that meeting, about 13 basis points priced, for an implied rate of 2.63% against the current 2.5%. That pricing is from the session before this release.
Full details of the August figures are in Statistics Canada’s own release. Data as of October 30, 2026.
Disclaimer: The content on bestcanadianstocks.ca is for informational and entertainment purposes only and does not constitute financial advice. Past performance is not indicative of future results. Always consult a qualified financial advisor before making investment decisions. All August 2026 GDP figures, sector percentages and quoted passages come from Statistics Canada’s own release, The Daily, “Gross domestic product by industry, August 2026”, published October 30, 2026. Monthly levels come from StatCan table 36-10-0434-01, vector v65201210 (Canada, all industries, chained 2017 dollars, seasonally adjusted at annual rates), pulled after that release and therefore post-revision. The September figure and the third-quarter figure in that release are preliminary. Official September GDP by industry arrives November 30, 2026; the official third-quarter estimate published that day is expenditure-based at market prices, a different measure from the industry-based figures here, and Statistics Canada notes the two can diverge slightly. Sector percentages are national industry aggregates and are not a statement about any individual company’s results. Policy rate, Bank Rate and deposit rate figures come from the Bank of Canada’s key interest rate page and our own report of the October 28 decision; the Bank’s press release and Governor Macklem’s opening statement are quoted as published; September CPI figures come from Statistics Canada’s September CPI release of October 19, 2026. December 9 decision pricing is from Montreal Exchange one-month CORRA futures as of Thursday, October 29, 2026, the session before this release. Percentages and ratios Statistics Canada does not publish are labelled as our arithmetic.
