Canada's GDP Growth Stalls in July Amid Construction Boom

Statistics Canada reported that Canada's gross domestic product (GDP) growth was flat in July, following strong second-quarter numbers. Despite a 1.3% gain for the construction sector, its fourth consecutive month of growth after declines in late 2025 and early 2026, manufacturing saw a 0.9% decrease, marking its first drop in four months.

The utilities sector experienced its strongest month of growth all year with a 1.7% surge in electricity generation, transmission, and distribution, driven by increased power demands for cooling during the July heat wave. On the other hand, declines were spread across mining, quarrying, oil and gas extraction, as well as retail and wholesale trade.

Newly revised data showed GDP was actually up 0.4% in June, compared with earlier estimates of 0.3%. StatCan's initial estimates call for a 0.2% gain in August, but those early figures will be revised next month. The agency said mining, quarrying, and retail trade rebounded in the month, offset by further declines in oil and gas extraction.

Peter Shannon, senior economist at KPMG, said the August pickup reinforces his view that the Canadian economy was enjoying a decent mid-year recovery before the latest U.S. tariffs took effect. He expects the bite from the new U.S. duties to meaningfully hit in September and take full effect in the fourth quarter.

Benjamin Reitzes, BMO's managing director of Canadian rates and macro strategist, said the August advance has him tracking GDP growth of 1.5% to 2% in the third quarter of the year, roughly in line with the Bank of Canada's forecast for 1.5%. He noted that fiscal policy changes will help support growth despite ongoing trade headwinds.