Economic commentary provided by Alberta Central Chief Economist Charles St-Arnaud.
Bottom line
Today’s release of the monthly GDP shows that the Canadian economy expanded after three consecutive months of contraction. However, the level of economic activity remains below its peak reached in March. As such, the level of activity in the manufacturing sector is 2.5% lower than it was in March, with sectors affected by US tariffs, namely steel manufacturing (-21%) and motor vehicle manufacturing (-5%), showing the most significant deterioration since their peaks.
The preliminary estimate for August suggests that economic activity was flat. As a result, GDP is estimated to have rebounded by 0.7% q-o-q in Q3.
Today’s GDP confirms our view that the Canadian economy is no longer deteriorating. However, the rebound remains timid, as business and consumer confidence remain weak. The result is that growth remains weak and any improvements in economic activity for the rest of the year will be modest. Whether the economy continues to improve may hinge on whether lower economic activity in many sectors translates into further job losses in the coming months, which would hinder any economic improvement. With economic activity lower for longer and the balance of risks to the Canadian economy tilted to the downside, the BoC will remain cautious. We expect more rate cuts in the policy rate before the end of the year, maybe as soon as October.
For Alberta, the details available in the report suggest that economic activity likely outperformed the rest of the country slightly in July due to higher activity in oil and gas extraction, pipeline activity, and agriculture. Economic activity in the province remains supported by stronger population growth than in the rest of the country, supporting housing construction.
The monthly GDP increased 0.2% m-o-m (+0.9% y-o-y), slightly stronger than expectations and the first increase in four months. The details show that 11 of 20 industrial sectors posted higher activity levels in July, with most of the increase coming from the goods-producing sectors.
Statistics Canada’s preliminary estimate shows that GDP was likely flat in August. This suggests that growth in the third quarter of 2025 likely rebounded to +0.7 q-o-q ar, after a 1.6% q-o-q ar. Contraction in Q2. Despite the rebound, economic activity in July remains below its recent March peak.
The goods-producing side of the economy grew by 0.6% m-o-m in July. The gains were broad-based, led by higher activity in natural resource extraction (+1.4% m-o-m) and manufacturing (+0.7% m-o-m). Despite the stronger activity in July, the level of activity in the goods-producing sector remains 1.0% lower than its peak in March, with manufacturing activity being 2.5% due to lower activity in sectors affected by the US tariffs, namely steel manufacturing (-20.5%) and motor vehicle manufacturing (-5.0%).
The services-producing side of the economy rose by 0.1% in July. The increase was mainly the result of higher activity in real estate and leasing (+0.3% m-o-m), transportation and warehousing (+0.6% m-o-m), and health care (+0.2% m-o-m), public administration (+0.3% m-o-m), and finance and insurance (+0.2% m-o-m). These increases were partly offset by lower activity in retail sales (-1.0% m-o-m) and other services (-0.1% m-o-m).
For Alberta, there is no specific data in the report. However, we can make an assessment based on activity in some key industries specific to Alberta. The increase in activity in oil and gas extraction, pipeline transportation, and agricultural activities suggests that the Alberta economy likely outperformed the rest of the country in July.
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Independent Opinion
The views and opinions expressed in this publication are solely and independently those of the author and do not necessarily reflect the views and opinions of any organization or person in any way affiliated with the author including, without limitation, any current or past employers of the author. While reasonable effort was taken to ensure the information and analysis in this publication is accurate, it has been prepared solely for general informational purposes. There are no warranties or representations being provided with respect to the accuracy and completeness of the content in this publication. Nothing in this publication should be construed as providing professional advice on the matters discussed. The author does not assume any liability arising from any form of reliance on this publication.