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The pace of economic growth in Canada slowed in August as real gross domestic product grew 1.2% in the month, Statistics Canada said Friday.

The rise compared with a revised 3.1% gain in July, up from its initial reading for the month of 3.0%.

The report came as the agency also released a preliminary estimate for a gain of 0.7% in September to bring growth in the third quarter to about 10%.

Economists on average had expected an increase of 0.9% for August, according to financial data firm Refinitiv.

TD Bank senior economist Sri Thanabalasingam said Canada’s economic recovery is losing steam as it moves into the recuperation phase, where additional gains will be harder to come by.

“We are now in a phase of the recovery that could see strong winds and dangerous tides,” Thanabalasingam wrote in a report.

“Navigating through the turbulence will not be easy as much will depend on the course of the virus. Getting the spread under control could right the ship, but seas will remain choppy without a vaccine or effective treatment. Calmer waters are still a long way away for the Canadian economy. “

Cases of COVID-19 have been rising in recent weeks leading to increased restrictions on businesses in some areas of the country, however the rules have not yet returned to levels seen in the spring when non-essential businesses were forced to close.

Bank of Montreal chief economist Doug Porter said the way forward has been deeply clouded by the second wave and renewed restrictions, so growth will cool considerably in the fourth quarter.

“However, we suspect that with ongoing massive fiscal support, less restrictions than earlier, and, simply, that consumers and businesses have learned to operate in this new environment, the late-year setback should be relatively mild. In fact, we continue to expect modest growth overall for Q4,” Porter wrote.

The growth in August came as goods-producing industries rose 0.5% and the services industries climbed 1.5% as overall 15 of 20 industrial sectors posted increases and two were essentially unchanged in August.

The public sector, which includes educational services, health care and social assistance, and public administration, grew 1.9% in August, as all three components rose. The education sector climbed 3.4%, while health care and social assistance rose 1.6%. Public administration gained 1.2%.

The arts, entertainment and recreation sector climbed 13.7%, while accommodation and food services rose 7.3% in August. The manufacturing sector added 1.2%.

Statistics Canada said overall economic activity for August was still about five% below the pre-pandemic level in February.