Canada’s Q2 GDP contraction of 1.6% on an annualized basis—its first decline in seven quarters—has thrust the economy into a precarious crossroads [1]. The collapse of exports, driven by U.S. tariffs on steel, aluminum, and autos, slashed shipments of passenger vehicles (-24.7%), industrial machinery (-18.5%), and travel services (-11.1%) [2]. Yet beneath this external shock lies a story of domestic resilience. Household spending surged 4.5%, fueled by robust services and durable goods demand, while government outlays rebounded 5.1% and residential investment climbed 6.3% [3]. This dichotomy—export weakness versus domestic fortitude—frames the central question for investors: Can Canada’s internal demand sustain growth while the Bank of Canada navigates the trade-off between rate cuts and inflation control?
The data reveals a nuanced picture. While non-residential…
