Canadian real GDP was unchanged in July, Statistics Canada reported on September 29, after a 0.4% gain in June, according to RBC Economics. Output stood 1.4% higher than a year earlier. The agency advance estimate for August points to growth of 0.2%, and National Bank of Canada calculates that, with no growth in September, the third quarter would expand at a 2.0% annualized pace. The second quarter grew at 3.3% annualized, so the economy is cooling from a strong spring, not stalling.
What the Flat July Reading Hides
The flat headline is the net of large offsets. Construction rose 1.3%, its fourth consecutive monthly gain, utilities rose 1.7% and accommodation and food services rose 0.8%. Manufacturing fell 0.9%, retail trade fell 1.0% and wholesale trade fell 0.4%, RBC reported. Mining, quarrying and oil and gas extraction also declined, according to BNN Bloomberg, and National Bank noted that goods and services output were both flat.
RBC attributes the slower pace to fading support, since the earlier gains came from recovering auto production and net trade. The United States put 50% tariffs on select Canadian exports into effect on August 22, so the July figures predate them.
Monthly real GDP moved in a narrow band around zero through the winter, jumped in April and has now cooled back to no growth, with the August advance estimate of 0.2% keeping the third quarter on a moderate path.
Real GDP at basic prices, seasonally adjusted, month-over-month change. August 2026 is the Statistics Canada advance estimate, which will be revised. Earlier months are subject to revision, and June reflects the revised 0.4% reported with the July release.
Q3 Still Tracks About 2%, With Little Margin
Forecasters sit close together on the third quarter. National Bank tracks 2.0% annualized, TD Economics describes a solid pace of about 2% and RBC expects about 1.8%. Each figure leans on an August estimate that Statistics Canada says will be revised and on a September that has not yet been measured. HDQ reads a quarter of 1.8% to 2.0% as moderate growth, not contraction, though a weak September would leave little cushion. That reading is an HDQ inference.
The Labour Market Sends a Softer Signal
Employment fell by 42,000 in August after three monthly gains that totalled 181,000, and the unemployment rate held at 6.4%, down from 7.1% a year earlier, RBC reported. Wage growth slowed to 2% from a year earlier, the slowest in five years, while hours worked rose 0.6% in the month. The new tariffs arrived too late in August to register in the survey, RBC noted.
TD Economics describes a labour market that remains in recovery mode. With wage growth at 2%, HDQ sees little domestic wage pressure pushing inflation higher, which leaves energy prices as the main source of inflation risk.
Three Forecasters, One Decision on October 28
Headline inflation held at 3.0% in August with gasoline up 22.8% from a year earlier, while the trim and median core measures averaged about 2.0%, according to Babypips. The Bank of Canada held its policy rate at 2.25% on September 2 for the seventh consecutive time, and Governor Macklem warned that upside risks to inflation had grown.
TD Economics expects the bank to stay inactive for now, citing uneven domestic growth, a labour market in recovery and elevated uncertainty. The RBC base case is a hold through 2026 and gradual increases in 2027, with risks tilted toward earlier hikes. National Bank economist Alexandra Ducharme wrote that the patience shown on the oil shock could be tested in the fourth quarter if energy costs spill into broader inflation. Overnight index swap pricing implied a 59% probability of a 15 basis point hike on October 28 as of September 25, according to BlueGamma.
The growth data in hand do not argue for a hike, and the September 2 hold rested on core inflation near 2.0%. HDQ therefore treats the October 28 decision as a call on whether gasoline-led headline inflation reaches the core measures, with the September CPI release on October 19 as the last major input. For variable-rate borrowers and households renewing a mortgage, the distinction matters, because a hike driven by energy prices would arrive while growth is slowing. That is an HDQ inference.