Canada’s economy did not grow in July, Statistics Canada said Sept. 29, as a 0.9-per-cent drop in manufacturing and a 1.0-per-cent slide in retail sales cancelled out gains in construction and electricity generation.
Real gross domestic product was unchanged from June, according to the federal agency. The flat reading follows a strong second quarter, when the economy grew at a 3.3-per-cent annualized pace, and a June gain that Statistics Canada revised up to 0.4 per cent from 0.3 per cent. For Canadians watching mortgage rates and job postings, the short version is that growth paused, not reversed, and an early estimate points to a small rebound in August.
Statistics Canada’s advance estimate shows real GDP rising 0.2 per cent in August, led by mining and retail trade, partly offset by weaker oil and gas extraction. The agency will update that figure on Oct. 30.
Where the economy slipped
Manufacturing posted its first monthly decline in four months. Within it, petroleum and coal product makers fell 5.7 per cent, which Statistics Canada attributed to refinery downtime in Ontario. That is a one-off disruption rather than a sign that demand collapsed, but it explains much of the factory weakness.
Retail trade fell 1.0 per cent, with declines across most subsectors. Wholesale trade slipped 0.4 per cent, and mining, quarrying and oil and gas extraction dropped 0.5 per cent. Potash mining contracted 6.4 per cent, its biggest monthly decline since September 2025, according to the agency.
Where it held up
Construction grew 1.3 per cent, its fourth straight monthly gain, and non-residential building construction rose 2.9 per cent, the fastest pace since January 2022. Utilities rose 1.7 per cent as a heat wave pushed up electricity demand. Accommodation and food services grew 0.8 per cent, which TD Economics linked to international travel tied to the World Cup. Ten of 20 industrial sectors expanded, so the headline number hides a split economy rather than a uniform stall.
Marc Ercolao of TD Bank described the pattern as “sawtooth” volatility that has persisted since last year, with one-off production disruptions, according to BNN Bloomberg.
What it means for the Bank of Canada
The Bank of Canada has held its policy rate at 2.25 per cent for nearly a year. Its next decision is Oct. 28. TD Economics said the July report “alone is unlikely to materially alter” the central bank’s outlook, and that the Bank likely has cover to stay on the sidelines. It also said third-quarter growth is tracking a solid 2 per cent annualized based on the August estimate.
Bank of Canada Deputy Governor Toni Gravelle has described the Bank’s position as a “true dilemma” between energy price shocks and the drag from trade disputes, BNN Bloomberg reported. Officials are expected to lean more on September jobs and inflation data than on July output.
The bigger test may be ahead. Peter Shannon of KPMG told BNN Bloomberg he expects new U.S. tariffs that took effect Aug. 22 to show up meaningfully in September figures, and estimated they could trim annual GDP growth by roughly half a percentage point if they persist. Those numbers will not be published until late November.
For younger workers and renters, the practical takeaway is that a flat month on its own does not signal a layoff wave, but the sectors that slipped, factories and retail, are big employers of people under 35. Watch the September labour force survey before drawing conclusions.
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Via Statistics Canada (The Daily, Sept. 29, 2026) and BNN Bloomberg. Additional sourcing: TD Economics.
