RBC Says Canada's Economy Shows Signs of Stabilizing, but Trade-Exposed Sectors Remain Weak

06:19 AM EDT, 10/14/2025 (MT Newswires) -- Early Canadian gross domestic product and net trade data have broadly shown signs that the economy is stabilizing after contracting in Q2, said RBC.

However, heavily trade-exposed sectors remain under significant pressure, driving expectations for softer industry data Wednesday, noted the bank.

Canada releases manufacturing sales for August Wednesday, at 8:30 a.m. ET.

Statistics Canada's preliminary estimate showed manufacturing sales contracted 1.5% month over month in August, partially reversing the stronger 2.5% gain in July. Part of this swing reportedly reflected a pullback in the transportation sector following a jump in motor vehicle sales in July, stated RBC. Vehicle production and sales from July to August are "notoriously" volatile due to typical factory retooling shutdowns.

Food sales were also reportedly weaker, and the 0.5% month-over-month rise in manufacturing production prices reported for August suggests sales volume likely more than reversed the 1.6% increase in July, added the bank. That would leave volume down about 4.5% in August from a year ago, with more substantial declines in sectors targeted by United States tariffs, such as primary metal manufacturing.

The positive news is that broader consumer demand in Canada has been resilient, supporting activities in sectors more domestically focused, it pointed out. Statistics Canada's preliminary estimate showed a 1% month-over-month increase in retail sales in August after a 0.8% decline in the previous month.

Housing activity has also continued to recover at a modest pace. Early data from local real estate boards point to a mixed national picture in September for home resales.

Overall, RBC maintains its expectation that softening in trade-exposed sectors will persist, but won't spread widely to other parts of the Canadian economy. The bank looks for weak GDP growth over the second half of this year, starting with a 0.5% annualized increase in Q3.

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