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Statistics Canada said gross domestic product growth was essentially unchanged in July, coming down from a strong second quarter for the economy.
The agency said the result came despite a 1.3 per cent gain for the construction sector in July, which marked its fourth consecutive month of growth after declines in late 2025 and early 2026.
Non-residential building construction saw its best month since the start of 2022, StatCan said, owing primarily to activity around a new hospital building in Toronto.
StatCan also said a 1.7 per cent surge in electricity generation, transmission and distribution powered the utilities sector to its strongest month of growth all year. A July heat wave across many parts of the country drove up power demands for cooling, the agency said.
On the other side, declines in July were spread across manufacturing, mining, quarrying and oil and gas extraction, as well as retail and wholesale trade.
Manufacturing's 0.9 per cent decrease was the sector's first drop in four months, StatCan said.
Mining and quarrying took a sharp hit in July, thanks in part to a 6.4 per cent drop in potash mining -- the largest monthly decline since September 2025. July's increase in oil sands extraction tempered wider declines in oil and gas.
Retailing activity meanwhile fell off at gas stations in July, which StatCan said coincided with rapidly rising gasoline prices in the peak summer travel season.
Estimates for flat growth to start the third quarter come after StatCan projected an annualized growth rate of 3.3 per cent in the second quarter.
Newly revised data showed GDP was actually up 0.4 per cent in June, compared with earlier estimates of 0.3 per cent.
StatCan's initial estimates call for the economy to pick back up with a gain of 0.2 per cent in August, but those early figures will be revised next month.
The agency said mining, quarrying and retail trade rebounded in the month, offset by further declines in oil and gas extraction.
The August GDP figures will partially capture the impact of new 50 per cent U.S. tariffs applied on a range of Canadian goods starting Aug. 22.
"The August pickup reinforces our view that the Canadian economy was enjoying a decent mid-year recovery before the latest U.S. tariffs took effect," said Peter Shannon, senior economist at KPMG, in a note.
Shannon said he expects the bite from the new U.S. duties to meaningfully hit in September and take full effect in the fourth quarter. KPMG projects GDP will be about half a percentage point lower over the course of a year should the tariffs remain in effect.
Benjamin Reitzes, BMO's managing director of Canadian rates and macro strategist, said in a note to clients Tuesday that the August advance has him tracking GDP growth of 1.5 to two per cent in the third quarter of the year. That's roughly in line with the Bank of Canada's forecast for 1.5 per cent in the quarter, he noted.
New tariffs create some roadblocks for the economy, but Reitzes said fiscal policy changes like Ottawa's move to expand investment incentives will help support growth.
"The Canadian economy continues to hang in there despite the ongoing trade headwinds," Reitzes said.
The Bank of Canada will get a look at new jobs and inflation data for September, as well as a read of its own quarterly surveys of businesses and consumers, before making its next interest rate announcement on Oct. 28.
Reitzes suggested these data prints will be more impactful for the central bank's decision than the July GDP release.
This report by The Canadian Press was first published Sept. 29, 2026.
Craig Lord, The Canadian Press
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