Canada’s GDP managed to grow for the first time in four months in July, even as the economic impacts of American tariffs began settling in, according to Statistics Canada.
On Friday, the agency reported that the gross domestic product increased by 0.2 per cent in July compared with the month prior. In addition, Statistics Canada gave a preliminary estimate for August’s reading to show that the economy was “essentially unchanged in the month.”
GDP measures the total sum of all goods and services produced by an economy in a given period of time, and is the primary gauge of recession.
July’s figure was slightly higher than the 0.1 per cent increase most analysts polled were expecting.
Some economists believe that although the economy is growing in the third quarter, from July through September, it is doing so at a relatively slower pace than it could be.
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“Canada’s economy is tracking very soft growth in Q3. While not a recession, it’s still an economy that’s bumbling along,” said Derek Holt, vice president and head of Capital Markets Economics at the Bank of Nova Scotia, in a statement.
“The combined effect leaves us tracking growth of only about 0.7 per cent at a seasonally adjusted and annualized rate in Q3 — that’s hardly much of any rebound from Q2.”
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July’s GDP reading marks the first report on economic growth in Canada during the third quarter of 2025, which ends in September. It won’t be clear until data releases later this year whether Canada has officially skirted a recession.
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During the second quarter of the year, from April through June, Statistics Canada reported that the Canadian economy shrank by 0.4 per cent compared with the first quarter, and was down 1.6 per cent compared with the second quarter in 2024.
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“Today’s number was a positive technically, yet still not a promising signal to expect continued growth going forward. The real GDP growth number for July of 0.2 per cent being in a positive number is a welcome reprieve from three months of consecutive decline,” said economist Anupriya Gangopadhyay at the Canadian Chamber of Commerce’s Business Data Lab.
“Though the data suggests that the economy was briefly out of the red zone, a careful mix of monetary and expansionary fiscal policy is required to stay below the inflation target level while supporting economic growth and job creation.”
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On Sept. 17 the Bank of Canada delivered its first cut to borrowing rates since March citing a “weakening economy.” Shortly after the announcement from the central bank, Governor Tiff Macklem said it expects to see “slow growth” in the near future.
“Growth was clearly negative in the second quarter, we are expecting growth somewhere around one per cent in the second half of the year. So that is slow growth. It’s not going to feel good,” Macklem said to reporters earlier in September.
“It is growth, but it’s slow growth because the economy is adjusting to a different relationship with its biggest trading partner.”
Statistics Canada on Friday said the better-than-expected growth in July was led by goods-producing industries with an increase of 0.6 per cent following three straight months of declines.
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Within the goods-producing category, the subsector which includes mining, quarrying, as well as oil and gas extraction saw a larger 1.4 per cent spike in July, and was the biggest contributor to the overall positive GDP result, according to the agency.
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Economists note how some of this rebound for industrial production compared to the the second quarter may because of the period when wildfires caused disruptions.
“Goods producing sectors led the increase, bouncing back 0.6 per cent after falling a cumulative 1.6 per cent over the prior three months,” said Nathan Janzen, assistant chief economist at the Royal Bank of Canada in a statement.
“Oil [and] gas extraction rose 0.9 per cent as production continued to ramp up following wildfire-related disruptions in the spring, and mining excluding the oil [and] gas sector bounced back 2.6 per cent following a three per cent drop in June.”
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Manufacturing, which has been directly hit by tariffs, also saw a bounce back in July of 0.7 per cent, after a sharp drop of 1.5 per cent in June.
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Within the manufacturing category, Statistics Canada highlights durable-goods industries were up by one per cent in July.
Durable-goods was led by a 3.2 per cent increase in transportation equipment manufacturing, and the manufacturing of motor vehicle parts up 10.5 per cent and motor vehicles up by 9.1 per cent in the month.
Economists note that even as some areas saw momentum in July, others were having a more difficult time because of tariffs, and further reports may reflect those impacts because of when new duties were imposed on steel products.
“Production in the heavily trade-exposed manufacturing sector rose 0.7 per cent after posting its largest production decline in Q2 (outside of pandemic lockdowns) since the 2008/09 recession,” says Janzen.
“Industries targeted directly with tariffs remained under pressure — iron and steel manufacturing fell another 19 per cent in July, to 29 per cent below year ago levels, coinciding with a hike in the U.S. tariff rate on steel products to 50 per cent beginning in June.”
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