The Canadian economy has stalled, and the details offer little reassurance. Real GDP was flat in August for a second straight month, according to Statistics Canada (StatCan). Retail and credit card activity helped support output, an ominous combination as credit industry reports point to rising balances and delinquencies. The agency’s preliminary September estimate suggests that stagnation would be good news compared to what lies ahead. 

Canada’s Economy Stalls For A Second Consecutive Month

Source: StatCan.

Canadian economic output stalled for another month. Following a flat July, real GDP remained “essentially unchanged” in August. Just 9 of 20 industrial sectors expanded, with goods-producing industries rising 0.1% but tamed by a 0.1% drop in services. The stagnation follows massive jumps in April (+0.6%), May (+0.3%), and June (+0.4%), highlighting an abrupt and rapid loss of momentum.  

Retail and Credit Card Activity Helping To Prop Up the Economy

The latest GDP report shows the economy may be living on borrowed time. One of the key areas of growth is retail output, rising 1.2% in August, led by vehicle dealers and food retailers. Also providing a boost was finance and insurance, which advanced 0.2%, with banking climbing 0.3% despite a slow mortgage market. The agency notes the growth in the latter was driven by non-mortgage lending activity, specifically credit cards.  

That specific data point sounds more concerning when paired with TransUnion comments. The consumer credit reporting agency recently warned of rising balances and delinquency rates for consumers. They noted that consumers are increasingly relying on credit cards to smooth consumption. To be blunt, the read here isn’t very optimistic—consumer spending is helping to prop up the economy while borrowers increasingly rely on credit cards to make ends meet.

Canadian GDP Expected To Contract In September 

Unfortunately, things are set to get worse according to the agency’s advance estimates. StatCan’s preliminary numbers point to a 0.1% drop in real GDP in September. Manufacturing and mining, quarrying, and oil and gas extraction are expected to lead the decline. However, the agency estimates average economic output in Q3 will still be 0.3% higher than in Q2, despite the loss of monthly momentum. 

 The figures also largely pre-date the latest tariff escalation. The U.S. imposed escalation only took effect in the final days of August, making September the first full month under those measures. It intensifies further as the first full month of Canada’s retaliatory tariffs won’t be seen until the October GDP data. StatCan hasn’t indicated whether its preliminary data fully captures the latest tariff escalation, leaving open the possibility of further weakness.