Hub Podcasts Canada's economy shrinks while the U.S.' economy grows
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Aug 29, 2025 Canada faces an economic downturn with a 1.6% GDP decline, primarily due to falling exports and weak business investment. In contrast, the U.S. economy continues to grow, raising questions about future Canada-U.S. trade negotiations. Concerns arise over stagnant wages and consumer spending driven by debt. The impact of these trends on monetary policy and the upcoming government budget is critically examined. Additionally, rising interest rates strain household finances, complicating mortgage renewals and consumer confidence.
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Exports And Investment Drove The Contraction
- Canada's Q2 GDP contracted 1.6% annualized driven by a 7.5% drop in exports and falling business investment.
- Tariffs and investment flight to the U.S. plus
Reduce Uncertainty To Restore Investment
- Clarify negotiating positions to reduce the 'uncertainty tax' that freezes business investment.
- Provide firms clear signals on U.S. market access to avoid capital going on strike.
Stagnant Wages Undermine Consumption
- Wage growth stalled with only 0.2% quarterly gains and several sectors saw declines, undermining affordability.
- Falling wages and shrinking savings mean recent consumption was largely debt-financed and may be unsustainable.