Canadian GDP growth came in at 0.1% in August, disappointing analysts and signaling a slowdown for the strong Canadian economy.

CIBC World Markets says that the disappointing GDP result seemingly puts the Bank of Canada’s forecast for the third quarter out of reach. And it does see this number as the start of a slowdown.

“True, August’s tepid showing comes after an impressive, and upwardly-revised, 0.5% gain in July. But a slowing growth trend is now taking hold, with the economy unlikely to live up to its potential in the coming quarters.”

“While the quarter got off to a favourable start, August’s below-consensus increase has put a damper on Q3 prospects. Indeed, even if September were to record a healthy 0.3% gain, average GDP at basic prices would be up an annualized 3.3% from the prior quarter. While largely in line with U.S. results, that would nonetheless constitute an obvious disappointment for the Bank of Canada, which had earlier predicted a 4% growth pace.”

CIBC claims that this report puts the Bank’s growth call in serious jeopardy. “With markets now pricing in upwards of two quarter-point cuts from the Fed, the Bank of Canada will find it difficult to follow through on its still hawkish rhetoric at any time in next several quarters.”

BMO Nesbitt Burns calls the August result a mild disappointment. Nesbitt says that goods-producing industries accounted for most of the softness in August, notably agriculture, mining, and utilities. “Declines in the two resource sectors were not a surprise, as they have been the weakest industries over the past year with declines of around 3%. However, the drop in utilities output was a mild shock, given the record heat in the month. Various outages forced utilities to curtail exports even amid sky-high demand. In contrast, the growth-leading construction and manufacturing sectors continued to churn forward.”

Nesbitt concludes, “Today’s listless increase suggests that Q3 growth will ebb to just a little over 3%, compared with 6.2% in Q1 and 4.3% in Q2. And, the pace appears poised to recede further in Q4. The big picture is that this growth rate remains the envy of the industrialized world, but it is also closer to the Bank of Canada’s view of the potential for growth.”