Deloitte cuts its 2027 growth forecast by 20% as the Bank of Canada weighs its October call
Canada's economy ground to a halt in July 2025, with Statistics Canada reporting gross domestic product (GDP) growth of 0%. That's a sharp pullback from the 3.3% annualised pace recorded in the second quarter.
The flat result arrived as new American import restrictions took effect and Deloitte Canada issued a downgraded long-term growth outlook, adding to a fraught economic backdrop ahead of the Bank of Canada's October 28 rate decision.
There were genuine pockets of strength in the data. Construction grew 1.3% in July, its fourth consecutive monthly gain after a difficult start to the year.
Utilities posted their strongest performance of 2025, rising 1.7%.
Real estate, rental and leasing extended its expansion to a sixth straight month, edging up 0.2%.
Professional, scientific and technical services rose 0.3%, its largest monthly gain in 20 months.
Declines, however, were both broad and punishing. Manufacturing fell 0.9%, its first contraction in four months, weighed down by a 6.2% slump in petroleum refining.
Mining, quarrying and oil and gas extraction retreated 0.5% for the second consecutive month.
Retail trade shed 1% and wholesale trade gave back 0.4%.
Statistics Canada's advance estimate projects a modest rebound of 0.2% in August.
Deloitte pares back its long-term growth outlook
The July data landed alongside a sobering update from Deloitte Canada, which cut its 2027 GDP growth projection by 20% — from 2% to 1.6% — citing the accumulated weight of US tariffs and Canada's retaliatory measures on consumer and business confidence.
The firm edged its 2026 forecast slightly higher, to 0.9% from 0.7% in June.
Previously, Deloitte Canada reported that a formal US withdrawal from the Canada-United States-Mexico Agreement (CUSMA) would strip $402 billion from Canada's real gross domestic product over the next decade and eliminate approximately 163,000 jobs annually on average. Trade diversification alone would only partially offset those losses.
Bank of Canada governor Tiff Macklem already warned that a fresh round of US tariffs and elevated global oil prices risk undoing Canada's hard-won economic recovery.
If the latest duties remain in place, the Bank estimates fourth-quarter GDP growth could be roughly halved to below 1%. The affected goods represent approximately 5% of Canada's exports to the United States.
"The developments are pulling the economy in different directions," Macklem said. "One creates downside risks to growth, while the other creates upside risks to inflation."
Bank of Canada governor Tiff Macklem issued a stark warning Monday that a fresh round of US tariffs and elevated global oil prices risk undoing Canada's hard-won economic recovery.https://t.co/k19n8NXNPd
— Canadian Mortgage Professional Magazine (@CMPmagazine) September 22, 2026
What the July miss means for mortgage professionals
Three pivotal data releases now stand between the industry and the Bank of Canada's next call. The September jobs report arrives October 9, September CPI follows on October 19, and the rate decision itself lands October 28. The central bank has held its overnight rate at 2.75% since April.
Andrew Grantham, senior economist at CIBC Capital Markets in Toronto, was blunt about the shelf life of July's print: "Given the escalation of US trade uncertainty towards the end of August, today's data will likely be viewed as old news," he wrote in a research note.
Meanwhile, Royal Bank of Canada (RBC) economists are forecasting that the BoC will hold its policy rate steady in the near term before beginning a gradual hiking cycle in early 2027.
"Incoming data will matter for the October decision, with communications from the BoC continuing to suggest it will be a close call," said RBC assistant chief economist Nathan Janzen and senior economist Claire Fan.
For brokers monitoring variable-rate clients and refinancing pipelines, October's data sequence will likely do more to shape rate expectations than any single GDP release.
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