Canada's flat July leaves an October rate hike in the balance
Statistics Canada said on Tuesday, September 29, that real GDP was unchanged in July, with August estimated at 0.2%, after overnight swaps had priced about 50% odds of a Bank of Canada hike in October.
Key takeaways
Canada's real GDP was unchanged in July, Statistics Canada said Tuesday, in line with what economists had expected. A preliminary estimate shows August growth of 0.2%.
Before the release, overnight swaps put the odds of a Bank of Canada rate hike in October at about 50%.
The flat month ended three straight months of growth. June was revised up to 0.4% in the same release.
Construction rose 1.3%, a fourth monthly gain in a row, while manufacturing fell 0.9%, led by a 6.2% drop at petroleum refineries.
Retail trade fell 1.0% in July. The August estimate is led by mining and quarrying and by retail trade, Statistics Canada said, partly offset by lower oil and gas extraction.
The bank meets before the final number
On Wednesday, September 2, the Bank of Canada held its policy rate at 2.25%, where it has been since a cut in October 2025. New US tariffs had made the growth outlook less certain, the bank said, and the risk of higher inflation had increased. Inflation had been hovering around 3%, mainly because gasoline prices were high, and inflation excluding gasoline was 2.2% in July.
In his opening statement that day, Governor Tiff Macklem said: "Governing Council will assess the sustainability of the economic rebound and the outlook for inflation, and is prepared to adjust monetary policy as needed."
On Monday, September 21, he said in Halifax that if the new tariffs remain in place, growth could be roughly halved in the fourth quarter, to below 1%. In a press conference that day, he said that if the bank is too slow, it would have to raise rates very quickly, and probably by more than if it had moved earlier.
On Friday, September 25, RBC assistant chief economist Nathan Janzen and senior economist Claire Fan wrote that a flat July posed downside risk to their tracking estimate of 1.8% annualized growth in the third quarter.
The bank decides on Wednesday, October 28. Statistics Canada updates the August estimate on Friday, October 30, two days later.
Frequently asked
Did Canada's economy grow in July?
Real GDP was unchanged in July, in line with what economists had expected.
What were the odds of an October rate hike before the release?
Overnight swaps put the odds of a Bank of Canada rate hike in October at about 50%.
When does the Bank of Canada decide, relative to the August update?
The bank decides on Wednesday, October 28, and Statistics Canada updates the August estimate on Friday, October 30.
What is the early read on August growth?
A preliminary estimate shows August growth of 0.2%.
