- Stephen Poloz, Bank of Canada Governor
Canada's economy unexpectedly contracted for the first time this year, after stalling in the previous month, affected by weak manufacturing and falling oil and gas extraction output. Monthly gross domestic product declined 0.1%, Statistics Canada reported, while an annual growth pace slowed to 2.2%, down from 2.5% in July. Analysts, however, expected the economy to post no growth on a monthly basis, while annual GDP to increase at a 2.3% pace. Canada's manufacturing sector appeared to be one of the largest negative contributors, as activity declined 1.2% during the month. The resource sector also was a drag for the Canadian economy, with mining, quarrying as well as oil and gas extraction falling 1.7%.
The data points that third-quarter growth may be lower than the 2.3% annualized rate expected by the Bank of Canada, and will lag the 3.5% growth reported in its neighbour - the US. On top of that, Bank of Canada Governor Stephen Poloz said the sudden plunge in crude prices will slash roughly a quarter percentage-point of economic growth next year. Poloz added oil at less than $90 a barrel would deliver a significant hit to the Canadian economy. He also acknowledged that cheaper oil could cost jobs in the energy sector and curtail demand for housing. However, cheaper oil will not change the central bank's outlook that the economy will return to full capacity in the second half of 2016.
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