The Canadian economy has contracted for the first time since February, with a slump in mining and energy highlighting the country’s reliance on the volatile natural resources sector.

The country’s real gross domestic product shrank 0.1 per cent in August, Statistics Canada said Wednesday, countering economists’ expectations of a 0.2-per-cent gain.

A drop in both the mining and oil and gas sector was a chief culprit. Metal ore mining fell because of lower output – reflecting softer global demand – while maintenance on some oilfield projects hampered output in the energy sector.

As Société Générale currency strategist Sebastian Galy notes, “it seems we forgot that Canada is dependent on the broad Asia/metal support as is Australia and Chile.”

The mining and oil-and-gas extraction sector has declined for the past four straight months. In August, metal ore mining fell 4.7 per cent as output dwindled at copper, nickel, lead and zinc mines as well as gold and silver ore mines and potash sites. Crude petroleum production slid amid maintenance activities at some oilfields.

The weak reading means third-quarter economic growth likely slowed to half the pace of the prior quarter, in keeping with the Bank of Canada’s recent downward revision to 1 per cent growth for the July-to-September period.

http://www.theglobeandmail.com/report-on-business/economy/economy-lab/stalling-economy-highlights-canadas-vulnerabilities/article4789982/