Economic commentary provided by Alberta Central Chief Economist Charles St-Arnaud.
Bottom line
Today’s release of the monthly GDP shows that the Canadian economy contracted in August, the fifth decline in economic activity this year. after three consecutive months of contraction. This is much weaker than the preliminary estimate, which suggested that economic activity was unchanged. The details reveal that some temporary factors hindered activity in August, notably the strike by Air Canada’s flight attendants, which reduced growth in August by almost 0.1 percentage points, suggesting that the rest of the economy was weak. There was also continued weakness in trade-sensitive sectors, with a decline in activity in manufacturing and wholesale trade, in utilities, and oil and gas extraction.
The preliminary estimate for September suggests that economic activity rose 0.1% m-o-m. However, if we take into account that air travel activity returned to normal in September with the end of the strike, it suggests that economic activity in the rest of the economy was likely flat. Nevertheless, GDP is estimated to have increased by 0.4% q-o-q ar. in Q3, marginally weaker than expected by the Bank of Canada. However, the weak underlying activity suggests that growth in Q4 could be below the 1% expected by the BoC.
Today’s GDP support our view that the Canadian economy is no longer deteriorating. However, it also shows that underlying economic activity remains anemic and that any improvements in economic activity for the rest of the year will be modest. The longer economic activity remains weak, the more likely we are to see important job losses. While the BoC suggested this week that it might be done with cutting its policy rate, a deterioration of the labour market would likely them into action.
For Alberta, the details available in the report suggest that economic activity likely underperformed slightly the rest of the country in August due to lower activity in oil and gas extraction and pipeline activity. Economic activity in the province remains supported by stronger population growth than in the rest of the country, which in turn supports housing construction.
The monthly GDP decreased 0.3% m-o-m (+0.7% y-o-y), lower than expectation. The details show that 11 of 20 industrial sectors posted lower activity levels in August, with most of the decrease coming from the goods-producing sectors.
Statistics Canada’s preliminary estimate shows that GDP increased in September. This suggests that growth in the third quarter of 2025 likely rebounded to +0.4 q-o-q ar, after a 1.6% q-o-q ar. Contraction in Q2, marginally weaker than expected by the BoC. Moreover, economic activity in August remains below its recent March peak.
The goods-producing side of the economy fell by 0.6% m-o-m in August. The losses were broad-based, led by lower activity in utilities (-2.3% m-o-m), mining, quarrying, & oil & gas extraction (-0.7% m-o-m), manufacturing (-0.5% m-o-m) and construction (-0.3% m-o-m). With the weaker activity in August, the level of activity in the goods-producing sector remains 1.5% lower than its peak in March, with manufacturing activity being -2.8% due to lower activity in sectors affected by the US tariffs, namely metal manufacturing and motor vehicle manufacturing.
The services-producing side of the economy declined by 0.1% in August. The decrease was mainly the result of lower activity in management of companies (-2.9% m-o-m), transportation and warehousing (-1.7% m-o-m), and wholesale trade (-1.2% m-o-m). These decreases were partly offset by higher activity in retail trade (+0.9% m-o-m) and arts, entertainment and recreation (+0.3% m-o-m).
For Alberta, there is no specific data in the report. However, we can make an assessment based on activity in some key industries specific to Alberta. The decrease in activity in oil and gas extraction and pipeline transportation, and agricultural activities, suggests that the Alberta economy may have slightly underperformed the rest of the country in August.
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Independent Opinion
The views and opinions expressed in this publication are solely and independently those of the author and do not necessarily reflect the views and opinions of any organization or person in any way affiliated with the author including, without limitation, any current or past employers of the author. While reasonable effort was taken to ensure the information and analysis in this publication is accurate, it has been prepared solely for general informational purposes. There are no warranties or representations being provided with respect to the accuracy and completeness of the content in this publication. Nothing in this publication should be construed as providing professional advice on the matters discussed. The author does not assume any liability arising from any form of reliance on this publication.