For starters, the Canadian economy saw an outright decline in Q2 2025. Real gross domestic product (GDP) contracted by 0.4% from the previous quarter (1.6% annualized) as a result of sharp drops in exports and business investment. Specifically, exports decreased by 7.5%, driven by a 24.7% drop in exports of passenger cars and light trucks. Much of this weakness can be attributed to the 25% tariff that the US has imposed on Canada’s automotive industry, one of our largest exporting sectors. In 2024, Canada exported $75.5 billion worth of motor vehicles and parts to the US, equivalent to 94.1% of all motor vehicles and parts exports ($80.2 billion) and 10.5% of total international exports ($721.0 billion). Meanwhile, business investment declined 0.6%, driven by a 9.4% drop in investment in machinery and equipment.
In addition to a shrinking economy, the labour market has weakened considerably in recent months. In August, the country lost 66,000 jobs (following a 41,000 loss in July) and the national unemployment rate climbed to 7.1%, its highest level since May 2016 excluding the pandemic. The unemployment rate has been on a steady upward trajectory for over two years now, marking one of the most sustained periods of rising unemployment outside of a major economic shock or recession. But while the unemployment rate was rising in 2023 and 2024 because rapid population growth was outpacing the rate of employment growth, rising job losses are now the leading cause. Since January, the number of jobs in Canada has contracted by a net 38,500, while the number of unemployed people has risen by 104,000, to 1.6 million.
Turning to the local housing market, after the Vancouver Region posted its busiest month for sales this year in July (3,389), activity softened in August with 2,829 MLS transactions. This was equal to a 17% month-over-month drop, almost double the typical 9% July-to-August decrease, and was the slowest August since 2012. Continuing a trend seen through much of this year, activity in the Fraser Valley Real Estate Board area weighed on the overall regional numbers. The 883 sales there were down 13% year-over-year and were 39% below the past 10-year August average, while the 1,946 transactions in the Greater Vancouver Realtors board area were down 3% year-over-year and were 23% below the long-run monthly average.
Barring an improvement in Canada-US relations and a near-term binding resolution on trade, expect the current trend of soft exports, sluggish business investment, and a weakening labour market to continue in the quarters ahead. With three interest rate decisions left on the calendar, the odds of further policy rate cuts by the Bank of Canada are high, right as the real estate market gears up for what has traditionally been a busier fall season.
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Our rennie intelligence division comprises our head economist, market analysts, and data scientists. Together, they empower individuals, organizations, and institutions with data-driven market insight and analysis. Experts in real estate dynamics, urban land economics, the macroeconomy, shifting demographics, and data science, their industry-leading data acquisition, analytical systems, and strategic research supports a comprehensive advisory service and forms the basis of frequent reports and public presentations, covering the Vancouver, Kelowna, Victoria, Seattle, and Coachella Valley marketplaces. Their thoughtful and objective approach embodies the core values of rennie.
