After a 0.1% increase in June, Canada’s gross domestic product was flat in July, Statistics Canada said Wednesday.

Strength in manufacturing, wholesale trade, accommodation and food services was offset by declines in mining, utilities and the retail sector, the government agency said.

Economists had expected GDP to grow 0.5% in July from the previous month.

After nine consecutive monthly declines, the manufacturing sector advanced 0.8% during the month.

Within the sector, durable goods manufacturing was up 2.4%. Output of motor vehicles and parts increased 17%, as activity partially resumed on some assembly lines following temporary closures over the last few months.

The output of the mining, and oil and gas extraction sector fell 1.5% in July, the ninth consecutive monthly decrease.

Both electric power generation and natural gas distribution decreased because of weaker demand attributable to unseasonably low temperatures, particularly in Central Canada.

Activity in municipal public administration fell 1.6%, largely as a result of a strike by municipal employees in Toronto.

The surprisingly weak economic activity in July could lead to third-quarter GDP growth that also falls short of expectations, according to Douglas Porter, deputy chief economist at BMO Capital Markets.

“With flat GDP in July, that puts even 1% growth in Q3 at risk (the BOC was initially looking for 1.3%), unless we get a neat reversal of this weakness in August,” said Porter. “Given the broad‐based softness here…don’t count on it.”

Economists at RBC Economics Research expect GDP growth to show improvements in August and September.

“Our expectation is that the spurt in manufacturing sales will provide support to August and September GDP and will be sufficient to see Canada’s economy record a modest increase in the third quarter,” said Dawn Desjardins, assistant chief economist. “The July report, however, does present downside risks to our 2% forecast for the quarter.”

IE