Governing Council members discussed developments in the Canadian economy. They noted that the economy had stalled. GDP had not grown between the first quarter of 2025 and the first quarter of 2026, and data had been volatile quarter over quarter during this period. US tariffs and trade policy uncertainty had combined to keep the economy in excess supply.

More recent indicators showed signs that the economy was recovering in the second quarter of 2026 and that growth was broadening from its reliance on consumer and government spending.

After contracting, growth in exports had resumed, though on a lower path. Canadian exports were being supported by the strong US economy, and higher global oil prices were providing a boost to energy exports. Businesses reported that they were adapting to the new trade environment. According to responses to the Business Outlook Survey, fewer US customers were holding back orders due to trade uncertainty, and some respondents indicated that they were adapting their production, shipping and customs arrangements. However, exports in sectors directly affected by US tariffs were still down compared to pre-trade conflict levels. More recently, aluminum exports benefited from elevated global prices and supply shortages in Europe.

Housing activity was still weak, but there were signs that resale activity had returned to positive growth in the second quarter after contracting in the previous two quarters, albeit with regional differences.