Analysts have further downgraded their expectations for economic growth in Canada after Statistics Canada announced October 31 that real gross domestic product shrank 0.1% in August.
Canada had total GDP of $1.628 trillion in August. The contraction follows flat growth in July after six months of consecutive increases.
The oil and gas sector drove the drop, falling 1.7% to $134.6 billion. This is the second consecutive monthly drop.
The Bank of Canada had predicted growth of 2.3% for 2014’s third quarter in its most recent estimate, but analysts are now saying this is unlikely.
“We estimate that even with a solid rebound in September, growth for all of Q3 will be challenged to even get up to 2.0% [on an annualized basis],” Douglas Porter, BMO Financial Group’s chief economist and managing director for economic research, who explained that BMO’s previous estimate was 2.5%.
CIBC economist Nick Exarhos is even less optimistic, forecasting growth of 1.8% for the quarter.
The Canadian dollar took a beating on the announcement, sliding from 0.8932 US to 0.8862 as of press time. This furthers the downward push experienced from declining oil and gold prices and a strengthening US dollar after the announcement of the Bank of Japan expanding its stimulus program, said Exarhos.
