Canada’s Economy Stalls in July as Manufacturing Declines Offset Utilities Gains
Statistics Canada reports that real GDP remained flat in July 2026, ending a three-month expansion streak. While utilities and construction grew, declines in manufacturing, mining, and retail trade held overall growth at zero. An advanced estimate suggests a modest rebound in August, though economists anticipate slower third-quarter growth due to new U.S. tariffs.
Canada’s economic growth came to a halt in July 2026, with real gross domestic product remaining flat after three consecutive months of expansion, according to Statistics Canada. The data indicates that gains in specific sectors were largely neutralized by contractions in others, resulting in no net change for the month.
The goods-producing sector, which accounts for roughly a quarter of Canada’s GDP, faced significant headwinds. Manufacturing decreased by 0.9 per cent, marking its first decline in four months. This drop was led by petroleum refineries, where activity fell by 6.2 per cent. Additionally, mining, quarrying, and oil and gas extraction declined by 0.5 per cent, representing the second consecutive monthly decrease for this subsector.
In the service sector, retail trade shrank by 1 per cent, while wholesale trade fell by 0.4 per cent. However, these losses were partially offset by positive performance in other areas. Utilities grew by 1.7 per cent, and construction expanded by 1.3 per cent. Professional, scientific, and technical services rose by 0.3 per cent, achieving their largest monthly growth rate in 20 months. Real estate, rental, and leasing also contributed positively, growing by 0.2 per cent, with real estate activities expanding for the sixth straight month.
Overall, only 10 out of 20 subsectors recorded expansion during July.
Looking ahead, an advanced estimate from Statistics Canada suggests the economy likely posted a rebound in August with a monthly growth rate of 0.2 per cent. This projected recovery is primarily driven by higher output in mining and quarrying, as well as retail trade.
Despite the potential August uptick, economists anticipate slower growth for the third quarter of 2026 compared to the prior period. The Bank of Canada has forecast annualized growth of 1.5 per cent for the third quarter, down from 3.3 per cent in the second quarter. This deceleration is attributed to uncertainty surrounding escalating trade tensions with the United States, particularly following the implementation of new sets of U.S. tariffs on Canadian goods in August.