Canadian economic growth was stuck in neutral in July, as the manufacturing sector pulled back for a second consecutive month.
Statistics Canada said Friday real gross domestic product was essentially unchanged for the first month of the third quarter, following a 0.2% decline in June.
The result came as services-producing industries gained 0.1% in the month, while goods-producing industries contracted 0.3%.
“The GDP growth backdrop in Canada continues to soften, in contrast to sticky inflation prints that are still running above the Bank of Canada’s 2% target,” RBC economist Claire Fan wrote in a report.
Nine of 20 industrial sectors posted increases for July.
The manufacturing sector was the largest negative contributor for July, as it fell 1.5%. Non-durable manufacturing industries fell 1.4%, while durable manufacturing industries declined 1.7%.
After moving lower in June due to forest fires, the mining and quarrying sector, excluding oil and gas, as well as the accommodation and food services sector rose in July, Statistics Canada said.
With oil and gas excluded, the mining and quarrying sector increased 4.2% in July, while accommodation and food services gained 2.3%.
Meanwhile, Statistics Canada said its early estimate for August pointed to an increase of 0.1% for the month with increases in the wholesale trade and finance and insurance sectors, partly offset by decreases in the retail trade and oil and gas extraction sectors.
“All told, assuming growth remains modest in September as the impact of high interest rates continues to bite, that leaves the Canadian economy on track for a flat-to-very low positive print for all of Q3,” BMO senior economist Robert Kavcic wrote.
“Recall that the Bank of Canada had assumed 1.5% growth in the July monetary policy report, so we’re on pace to see another undershoot of the near-term forecast.”
The Bank of Canada kept its key interest rate target on hold in September, but said it was prepared to raise rates again if needed to bring inflation back to target.
The central bank’s next interest rate announcement is set for Oct. 25 when it will also release its fall monetary policy report.