Question Period Note: Gross Domestic Product at Basic Prices: August 2022

• Real gross domestic product (GDP) at basic prices edged up 0.1% in August, following a 0.1% increase in July.
• Real GDP growth in August was slightly above market expectations of a 0.0% increase.

• The global economy is facing many headwinds, notably with higher inflation worldwide and central banks swiftly raising rates.
• Still, real GDP in August shows that the Canadian economy remains resilient, with the increase in activity leaving real GDP 2.6 per cent above its pre-pandemic level.
• The government is making significant investments to help Canadians afford the cost of living and to build a stronger economic future for all Canadians.

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• Bottom Line: Overall, a positive report, as real GDP at basic prices edged up (+0.1%) in August, a touch better than expected by market, and another 0.1% increase is likely in September based on the estimate from Statistics Canada. While the Canadian economy held up better than expected in the third quarter, growth is nevertheless slowing along with monetary policy tightening, high inflation, and weaker external demand.
• Industry Breakdown: Gains were reported in 14 of 20 industrial sectors, with increases in services-producing industries (+0.3%) largely offset by declines in goods-producing industries (-0.3%). Retail sales (+1.2%), including at gasoline stations (+6.9%), and wholesale trade (+0.9%) rose following two consecutive months of weakness. On the other hand, manufacturing saw its fourth decline (-0.8%) in five months, along with lower activity in oil and gas extraction (-1.0%) and construction (-0.7%) partly offset by a strong rise in agricultural activity (+3.9%). Part of the manufacturing weakness reflects temporary shutdowns and turnarounds at some major manufacturers in petroleum chemicals, and therefore are expected to be temporary.
• Recovery Relative to Pre-Pandemic: Economic activity in August was 2.6% above its level in February 2020, with 14 of 20 sectors having output above their pre-pandemic levels (with finance and insurance, professional services and agriculture, forestry, fishing and hunting the furthest above). Weakness relative to pre-pandemic is still most pronounced in contact-sensitive industries, including arts and entertainment (-8.0%) and transportation and warehousing (-8.3%).
• Outlook: Looking ahead, Statistics Canada’s preliminary data points to real GDP increasing 0.1% in September. The press releases suggests that weakness was offset by gains in the natural resource and manufacturing sectors. Together with an upward revision to the data in previous months, and assuming the September estimate holds, real GDP at basic prices would grow by 1.6% (annual rate) in the third quarter as a whole – official data based on real GDP at market prices to be released on November 29th.