Canada’s economy was unchanged in July, meeting market expectations but losing momentum after three consecutive months of expansion. Statistics Canada’s advance estimate pointed to a 0.2% rebound in August, offering a tentative sign that the third quarter may have regained some traction after a flat start. The July result followed revised monthly growth of 0.4% in June and came before a new round of U.S. tariffs took effect in August.
The headline figure concealed a sharp divergence across industries. Manufacturing output fell 0.9%, its first decline in four months, with petroleum refinery activity dropping 6.2%. Mining, quarrying and oil and gas extraction decreased 0.5% for a second consecutive month. Those losses were largely offset by a 1.7% increase in utilities and a 1.3% rise in construction, which expanded for a fourth straight month.
Services-producing industries were also broadly unchanged. Retail trade contracted 1.0%, led by a 3.5% decline at gasoline stations, while wholesale trade fell 0.4% after being one of the main contributors to June’s expansion. Professional, scientific and technical services rose 0.3%, their strongest monthly increase in 20 months. Real estate, rental and leasing activity gained 0.2%, extending its expansion to a sixth consecutive month.
The flat July reading marked a slowdown from Canada’s second-quarter performance, when real GDP increased at a 3.3% annualized pace, the strongest quarterly growth in three years. The Bank of Canada has projected annualized growth of 1.5% for the third quarter. Statistics Canada said the preliminary August improvement was led mainly by higher output in mining, quarrying and retail trade, although the early estimate remains subject to revision when complete data are released.
What it means for traders: The report gives USD/CAD traders two competing signals. July’s stagnation and the weakness in manufacturing and trade-sensitive industries point to softer near-term momentum, while the estimated 0.2% August rebound reduces the risk that the economy remained stalled. Reuters reported the Canadian dollar was 0.06% weaker at C$1.4179 per U.S. dollar after the data, equivalent to 70.53 U.S. cents, while Canada’s two-year government bond yield fell 3.1 basis points to 2.567%. Money markets were pricing a 25-basis-point Bank of Canada rate increase in December, even as most economists expected the central bank to leave rates unchanged through the year.
The next focus will be whether the August estimate is confirmed and how the new U.S. tariffs affect Canadian manufacturing, trade and hiring. Traders will also watch subsequent inflation and labor-market releases for evidence that slower activity is easing price pressure or that tariff-related costs are keeping inflation risks elevated. For the Bank of Canada, the balance between weak July output, a possible August rebound and its 1.5% third-quarter forecast will shape expectations before the next policy decision.