According to advance estimates from Statistics Canada, Canada’s real GDP was essentially flat in the second quarter of 2025 (April-June), a notable slowdown from the 2.2% annualized growth seen in the first quarter.

Published August 28, 2025

Canada’s economy saw a contraction in the second quarter of 2025, following a period of modest growth earlier in the year. The latest data and forecasts point to a challenging economic environment driven by global trade uncertainty.

Recent GDP Data (Q2 2025)

  • Real GDP Growth Rate: According to advance estimates from Statistics Canada, real GDP was essentially unchanged in the second quarter of 2025 after a sharp increase in the first quarter. Monthly data showed a decline in GDP in both April and May, followed by a slight rebound in June.
  • Key Factors: The contraction was primarily driven by a sharp drop in exports, particularly to the United States. This was a direct result of trade activity being pulled forward into the first quarter to front-load shipments in anticipation of new tariffs. Sectors like manufacturing and mining, quarrying, and oil and gas extraction saw a decline, while services were largely flat.

Outlook and Forecast

The outlook for the remainder of 2025 and into 2026 is cautious, with many economists predicting a period of very slow growth or even a mild recession.

  • Bank of Canada: The Bank of Canada, in its July 2025 Monetary Policy Report, noted that while the economy has shown some resilience, GDP is estimated to have contracted in the second quarter. The Bank’s forecast is for modest growth in the second half of 2025, but it acknowledges that the unpredictable nature of global trade policy poses a significant risk.
  • Fiscal Forecasts: The Parliamentary Budget Officer’s June 2025 report anticipated that real GDP would be flat in the second quarter, largely due to the impact of tariffs.
  • General Consensus: The general consensus among major Canadian banks and other forecasters is that the economy will continue to face headwinds. A survey by the Bank of Canada found that a significant portion of market participants believe there is a notable probability of a recession in the next 12 months.

Canada’s economic performance has been a mixed bag recently, with the latest data and forecasts pointing to a period of slow or flat growth after a surprisingly strong start to the year.

Recent GDP Data

  • Real GDP Growth Rate: According to advance estimates from Statistics Canada, Canada’s real GDP was essentially flat in the second quarter of 2025 (April-June), a notable slowdown from the 2.2% annualized growth seen in the first quarter.
  • Monthly Breakdown: The flat quarterly result was a combination of monthly declines in April and May, followed by a small rebound in June. This indicates a loss of momentum in the middle of the year.

Key Factors and Industry Performance

  • Exports and Trade: The slowdown in the second quarter was largely a result of trade-related issues. Exports, particularly to the United States, fell sharply after a pre-tariff-related surge in the first quarter. This was a key drag on the economy.
  • Goods vs. Services: The goods-producing sector, including manufacturing and mining, saw declines, while the services sector remained relatively flat.
  • Household Spending: Consumer spending has held up better than expected, and residential investment has shown some signs of bouncing back. However, the overall consumer environment is seen as cautious.

Outlook and Forecast

The outlook for the Canadian economy remains uncertain, with a wide range of forecasts from different institutions.

  • Bank of Canada: The Bank of Canada has noted the volatility and uncertainty surrounding global trade. In its recent reports, the Bank acknowledges the slowdown in economic activity but continues to project a gradual path to recovery, assuming trade tensions do not escalate significantly.
  • Private Sector Forecasts: Many economists are forecasting a period of weak growth for the rest of 2025. Some anticipate growth of less than 1% for the year as a whole, while others see a risk of a mild recession, defined as two consecutive quarters of negative growth. The primary risks to the outlook are a further increase in global trade tensions and a weaker-than-expected U.S. economy, as the U.S. is Canada’s largest trading partner.