As expected, GDP growth was flat in July in after contracting 0.2 percent in June, as a 0.3 percent decrease in the goods-producing industries was offset by a 0.1 percent gain for services. GDP rose 1.1 percent year-over-year.

The momentum didn't pick up much in August based on preliminary data pointing to a 0.1 percent increase. Economic growth in Canada contracted at an annualized pace of 0.2 percent in the second quarter, below the Bank of Canada's 1.5 percent projection, pointing to a potential downward revision in the next Monetary Policy Report. The central bank projected another 1.5 percent of growth in the third quarter.

Overall, activity expanded in 9 of 20 industrial sectors in July.

Within services, accommodation and food rose 2.3 percent after fires weighed on activity in June. Finance and insurance rose for the third consecutive month, by 0.3 percent and real estate and rental leasing was up 0.1 percent. Wholesale trade was up 0.3 percent as was public administration. On the downside, retail trade, transportation and warehousing, as well as professional, scientific and technical services decreased 0.2 percent.

Goods-producing industries contracted for the fourth consecutive month, led by a decline of 1.5 percent in manufacturing with weakness in both durable and nondurable sectors. Construction was flat, while mining, quarrying, and oil and gas extraction was up 1.8 percent. Oil and gas rebounded 4.2 percent after being impacted by wildfires in June. Overall industrial production was down 0.3 percent while energy expanded 0.2 percent.

In its minutes of discussions leading to the decision to leave the policy rate unchanged at 5 percent in September, the central bank said the members of the Governing Council noted the Canadian economy had entered"a period of softer growth" and that"the full impact of more recent policy tightening had yet to be felt." That being said, frustration about the slow progress in taming inflation was still well and alive. In other words, slower demand and growth alone won't be enough to remove rate hikes from the table. Ultimately, it's how this slowdown translates into easing inflation pressures that matters most. This means that today's GDP data that are consistent with softening activity will need to be backed by evidence of easing inflation to bring real relief to the BoC.

After falling 0.2 percent in June, GDP in July is expected to come in unchanged.

Gross domestic product (GDP) is the broadest measure of aggregate economic activity and encompasses every sector of the economy. In contrast to most industrialised countries a monthly estimate is provided derived from the value added by labour and capital in transforming inputs purchased from other producers into that industry's output. Data for the reference month are usually released close to the end of the second month after the reference period.

Instead of producing an advanced quarterly GDP figure and revising it the following two months, Statistics Canada releases monthly estimates of real GDP at Basic Prices. This release breaks down real output by seven goods-producing industries and twelve service-producing industries, and includes special aggregations such as business sector, non-business sector, and industrial production.

The sources of data used for monthly and quarterly estimates often differ and leads to very different estimates for certain items, such as price deflators. As a result, the monthly figures are not perfectly correlated with the quarterly numbers. However, the monthly data do give some idea of where the quarter is headed and especially in an uncertain environment, they are closely watched. While industrial production is closely watched in the U.S., it is not in Canada especially since the economy has become increasingly dominated by services. However, the goods sector is more vulnerable to wide swings in output compared to services, and exports remain dominated by industrial output.