Canada’s actual gross home product remained flat in July following three months of growth, an early signal that financial progress might have slowed within the third quarter following a second-quarter rebound.
Positive aspects in building, 1.3 per cent, and utilities, 1.7 per cent, have been offset by decreases within the manufacturing and mining sectors in July, in addition to quarrying and oil and fuel extraction — which contracted by 0.9 per cent and 0.5 per cent month over month, respectively. Contractions in retail and wholesale commerce additionally offset some will increase in services-producing industries, weighing on financial progress.
Total, solely 10 out of 20 subsectors expanded in July.
July’s flat progress got here after the economic system expanded by 0.4 per cent month over month in June and 0.3 per cent in Might.
Flash estimates recommend the economic system expanded by 0.2 per cent in August, led by will increase in mining and quarrying in addition to retail commerce that have been partially offset by decreases in oil and fuel extraction.
“The numbers are a blended bag, and there’s numerous issues taking place underneath the hood whenever you have a look at the month-to-month GDP numbers. It took a break in July, nevertheless it was according to what’s happening,” mentioned LJ Valencia, an economist with Desjardins.
“The weak spot was fairly broadbased, nevertheless it was offset by among the power that we’re seeing.”
Economists largely anticipate progress to gradual within the third quarter of 2026 because of financial uncertainty from escalating commerce tensions with america, after the economic system rebounded and grew by 3.3 per cent on an annualized foundation within the second quarter.
Deloitte Canada’s newest financial outlook suggests the latest levies are anticipated to sharply weaken progress within the last quarter of 2026 and into early 2027. Forecast tables predict the Canadian economic system will broaden by 0.9 per cent on an annualized foundation in 2026 and by 1.6 per cent in 2027.
Family and enterprise confidence can even stay subdued because of the persistent menace of tariffs and extra commerce measures, the report mentioned.
“The previous financial tightening cycle and successive rounds of commerce tensions have taken a toll on the Canadian economic system. Essentially the most outstanding weak spot in our economic system continues to be enterprise non-residential funding,” wrote Daybreak Desjardins, Deloitte Canada’s chief economist.
Abbey Xu, an economist with RBC Economics, mentioned she isn’t placing an excessive amount of weight on a single month’s information, particularly since flash estimates recommend a rebound in August.
A part of the decline in July additionally appears non permanent, she famous, referencing some unplanned downtime at a southwestern Ontario oil refinery that led to a lower in manufacturing.
RBC continues to be forecasting 1.8 per cent annualized progress for the third quarter of 2026.
“We have to see persistent weak spot for a couple of months earlier than calling it a broader deteriorating economic system. Up to now, the whole lot is fairly in line with a gradual restoration story for Canada,” Xu mentioned.
Most economists say the Financial institution of Canada will possible keep on the sidelines for now earlier than mountain climbing charges in 2027.
“The U.S. tariffs and the counter-tariffs that have been launched to start with of September could have modest upward stress on costs. Vitality costs are nonetheless elevated, and there’s no certainty to when that battle will truly finish,” Valencia mentioned.
“If actual GDP progress comes out stronger than what we anticipated, that would put stress on the Financial institution of Canada to alter its rate of interest earlier than our present name, however that’s if issues keep the place they’re,” he mentioned.
Xu mentioned the total affect of the tariffs possible gained’t present up till September’s information and so they nonetheless pose a draw back threat for financial progress. Nonetheless, the broader macroeconomic impacts will possible be contained as a result of the levies will solely considerably have an effect on a small handful of sectors.
Core inflation measures are additionally sitting close to the 2 per cent goal, which suggests increased vitality costs haven’t spilled over to broader inflation simply but, regardless of the elevated total inflation fee at three per cent, she added.
“I don’t assume at present’s report materially modified the Financial institution of Canada story … Our base case continues to be that the Financial institution of Canada will stay on maintain for the rest of 2026 earlier than step by step mountain climbing firstly of 2027.”
• Electronic mail: ptran@postmedia.com