Canada GDP was weaker than expected in August, when it contracted 0.3 percent, only partly offset by an upward revision to the previous month's growth estimate to 0.3 percent from 0.2 percent. Forecasters in an Econoday survey had anticipated a flat reading in August.

The advance estimate for September points to a 0.1 percent uptick, which would put the third quarter GDP growth rate at 0.1 percent.

Today's data support the Bank of Canada's projection of a weak economic performance in this year, with growth averaging just 0.75 percent in the second half after contracting in tehs econd quarter. However, the central bank raised the bar to deliver another rate cut, suggesting that the data would have to come much lower than it already forecasts to bring the policy rate below the current 2.25%.

August's GDP decline was the largest since December 2022, with goods-producing industries down 0.6 percent and services down 0.1 percent.

Except for a flat GDP in agriculture, forestry, fishing and hunting, all major goods categories contracted on the month. Mining, quarrying, and oil and gas extraction fell 0.7 percent, utilities 2.3 percent and construction 0.3 percent. Manufacturing declined 0.5 percent, with durables down 0.8 percent and non-durables down 0.2 percent. Machinery, an indicator of business investment activity, was down 2.8 percent. Energy retreated 0.9 percent on the month and overall industrial production fell 0.8 percent.

In services, which declined for the first time in six months, the picture was more mixed, with seven sectors posting gains and as many posting declines, while public administration was flat.

Transportation and warehousing was down 1.7 percent, dampened by a flight attendant strike that led to flight cancellations. As a result, air transportation dropped 4.6 percent, the largest decrease since January 2022, when a new Covid variant emerged. Wholesale trade, down for the first time in four months, was another significant downward contributor with a 1.2 percent decline. This was partly offset by a 0.9 percent rebound in retail trade.

Advance estimates for September point to increases in finance and insurance, mining, quarrying, and oil and gas extraction, and manufacturing, while retail and wholesale trade would decline.

No growth expected in August, the kind of number that supports BOC rate cuts.

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.