Key Facts
• On August 29, 2025, Statistics Canada reported a 1.6% GDP decline in Q2.
• This marks the first negative growth in seven quarters.
• U.S. tariff measures caused a 7.5% drop in exports, the largest in five years.
• Business investment fell by 0.6%, while domestic demand rose by 3.5%.
• Household consumption increased by 4.5%, housing investment by 6.3%, and government spending by 5.1%.
• Q1 2025 GDP growth was revised down to 2.0%, with H1 2025 growth at 0.4%.
• June GDP fell by 0.1%, marking three consecutive months of decline.
• Manufacturing, accounting for 25% of GDP, saw reduced production.
• July’s preliminary GDP showed a 0.1% increase, with Q3 2025 expected to improve.
• Market expectations for a Bank of Canada rate cut in September rose to 48%.
Summary
Canada’s GDP contracted by 1.6% in Q2 2025, the first decline in seven quarters, driven by a 7.5% export drop due to U.S. tariffs. Domestic demand grew by 3.5%, supported by increases in household consumption, housing investment, and government spending. Business investment fell by 0.6%. June GDP declined by 0.1%, marking three consecutive months of contraction, primarily due to reduced manufacturing output. July’s preliminary GDP showed slight growth, with Q3 2025 expected to improve. The Bank of Canada is now more likely to cut rates in September, with market expectations rising to 48%.
