According to the Canadian government’s statistics office, the Canadian economy was flat in August, and likely slipped into a shallow contraction in the third quarter.

Analysts attribute the slowdown to higher interest rates, inflation, forest fires, and a drought which has spread across the country.

In September, the real GDP remained flat as well, marking the third such month in a row, according to the preliminary data.

The report said that there was a 0.1% increase month over month in the services-producing industries, and that there was a 0.2% contraction within the goods-producing sector. According to the data, only eight of the 20 industrial sectors examined expanded.

Manufacturing contracted by 0.6% in August, with non-durable and durable goods manufacturing contributing to the decrease for the third month in a row.

There was a 1.2% increase in the mining, quarrying, and gas extraction sector for August. In its report, Statistics Canada wrote, “This third consecutive monthly increase brought activity above the April level, before activity fell in May due in part to the impact of the forest fires.”

Wholesale trade increased 2.3% for August, as retail business declined 0.7%, marking the third straight month in a row it declined. Accommodation and food services was down 1.8% for August, with contractions in both subsectors.

.Agriculture, forestry, fishing, and hunting shrank 3.2% in August, for the biggest decline since August 2021. Meanwhile crop production (excepting cannabis) contracted 6.7% in August 2023, as drought conditions in Western Canada drove down expected yields.

Tiago Figueiredo, an economist with Desjardins, said in an interview with Reuters, “Whether or not the economy is already in recession is less important than the fact that the lagged impacts of monetary policy are likely to materially depress economic activity moving forward. As a result, we expect the economy to more clearly enter a recession in 2024.”