Canada’s growth stalls in July after three months of expansion

# What happened Canada's real gross domestic product was flat in July following three months of month-over-month expansion. The stop in monthly growth came after revised gains in May and June (0.3% and 0.4% respectively), and it signals a softer start to the third quarter after a strong second-quarter rebound on an annualized basis.

# Which sectors moved the number Only half of Canada's 20 industry subsectors expanded in July. The biggest contributors to positive output were:

• Construction: +1.3%
• Utilities: +1.7%

The largest drags were in goods-producing industries:

• Manufacturing: -0.9%
• Mining, quarrying and oil and gas extraction: -0.5%

Retail and wholesale trade also contracted and reduced overall services-sector momentum.

# The near-term picture Statistics Canada's flash estimate for August suggested a 0.2% expansion, driven by stronger mining and quarrying and a pickup in retail trade, partially offset by declines in oil and gas extraction. That implies some volatility month to month rather than a clear trend.

# Policy and market implications Economists expect third-quarter growth to slow because of growing economic uncertainty tied to escalating trade tensions with the United States. Business and household confidence is already subdued, and firms may delay investment decisions while tariff threats persist.

Deloitte Canada's economic outlook says recent levies are expected to sharply weaken growth in the final quarter of 2026 and into early 2027, trimming business non-residential investment in particular. Deloitte's forecast tables show the Canadian economy expanding by 0.9% on an annualized basis in 2026 and by 1.6% in 2027.

RBC Economics, while cautious about a single month of data, still projects 1.8% annualized growth for Q3 2026, reflecting expectations that some sectors will rebound after temporary disruptions.

# What to watch next

• August monthly GDP revisions and the full release of August data to confirm whether the flash 0.2% figure holds.
• Trade policy developments and any new levies or countermeasures that could affect cross-border flows and business investment.
• Business investment trends, since several forecasts flag non-residential investment as a weak spot that could restrain growth into 2027.

# Bottom line