MNI Analysis:Canada Aug GDP -0.1%,Disappoints On Weak Goods>

--Ex Energy +0.1% M/M; Ex Manufacturing Unchanged

By Yali N'Diaye

     OTTAWA (MNI) - Canada's GDP edged down 0.1% in August, contracting 

for the first time since last October, as the goods sector dragged down 

the monthly performance, data from Statistics Canada showed Tuesday. 

     Analysts in a MNI survey had expected GDP to edge up 0.1% after 

being flat in July. 

     Output in the goods-producing industries was responsible for August 

weakness, with a GDP contracting 0.7% after a 0.4% decline in July. 

     Services, on the other hand, continued to expand, as GDP rose 0.1%, 

although this was a slowdown from July's 0.2% gain. 

     Overall, August data confirmed the Bank of Canada's expectation of 

a slowdown in the third quarter, supporting the cautious tone adopted by 

the central bank more recently, following two rate hikes over the 

summer. 

     Assuming September was unchanged, third quarter GDP would be up 

0.4%, or 1.5% on an annualized basis, meaning it would take a lot to 

even reach half the pace of the second quarter's 4.5% annualized GDP 

growth. 

     Overall, 12 sectors were up on the month, all in services, 

representing about 60% of GDP, with wholesale trade up 0.4%, real estate 

and rental and leasing up 0.2%, health care and social assistance up 

0.3%, and public administration up 0.2%. 

     Yet that was not enough to offset the widespread declines in the 

goods-producing industries, "in part due to temporary reduced capacity 

in the manufacturing and the mining, quarrying and oil and gas 

extraction sectors," the agency said. 

     The manufacturing decline was led by non-durables, which contracted 

-2.0% on the month, the largest decrease since December 2013. 

     In particular, chemical manufacturing fell 7.3%, its largest drop 

in 20 years, the agency said, citing maintenance shutdowns, but also, 

which is more concerning, "lower demand from export markets." 

     Durable manufacturing edged down 0.1%. 

     Overall, GDP excluding manufacturing was flat on the month, as it 

was in July. 

     Mining, quarrying, and oil and gas extraction was the other large 

drop in goods sectors, as output contracted 0.8% in August, while 

utilities (-0.8%) suffered from a cooler-than-usual summer month in 

August, reducing demand for electricity. 

     Energy contracted 1.5% in August, posting the third consecutive 

decrease. 

     Excluding energy, GDP edged up 0.1%, the same pace as in July. 

                     ** MNI - Ottawa **

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