Canada GDP Research Brief

GDP contracted as exports and investment fell. Canada’s economy shrank by 1.6 per cent in the April-June period on a quarter-over-quarter annualized basis – well below the market consensus of a 0.7 per cent decline. This outsized loss was driven by a sharp drop in exports following tariff front-running earlier in the year, alongside continued weakness in business fixed investment. At the same time, manufacturers and wholesalers built up inventories amid trade policy uncertainties, partially offsetting the external drag on GDP growth. Another bright spot was household consumption, which rose 4.5 per cent, boosted in part by a surge in auto sales early in the quarter. Government consumption and investment also climbed 5.7 per cent, providing an additional backstop and helping to support final domestic demand in the second quarter.