Overview

• Statistics Canada reported a 1.6% annualized contraction in Q2 and a 0.1% drop in June, marking a third straight monthly decline and the first quarterly setback in seven quarters.
• U.S. tariffs and trade uncertainty weighed heavily on exports and manufacturing, with survey data showing about two fifths of manufacturers reporting tariff impacts.
• Swaps implied roughly a 47% chance of a quarter‑point cut on Sept. 17, up from about 40% before the release, as markets reassessed the policy path.
• The Canadian dollar fell to about 72.55 US cents and 2‑ and 5‑year Government of Canada bond yields dipped around 3 basis points following the GDP data.
• The central bank will scrutinize the figures ahead of its Sept. 17 decision with the policy rate at 2.75%, while early estimates point to a 0.1% July gain and some forecasts track Q3 growth between flat and 0.5%.