Gross domestic product, income and expenditure, second quarter 2025
Released: 2025-08-29
Real gross domestic product (GDP) declined 0.4% in the second quarter of 2025, following a 0.5% gain in the first quarter. The contraction in the second quarter was driven by significant declines in the export of goods, as well as decreased business investment in machinery and equipment. These declines were tempered by faster accumulations of business inventories, higher household spending and lower imports of goods.
On a per capita basis, real GDP was down 0.4% in the second quarter, after an increase of 0.4% in the previous quarter. Final domestic demand, which represents total final consumption expenditures and investment in fixed capital, was up 0.9% in the second quarter of 2025, following a decline of 0.2% in the first quarter. Increased household and government spending led the rise in final domestic demand in the second quarter.
Chart 1
Real gross domestic product and final domestic demand
Chart 2
Contributions to percentage change in real gross domestic product, second quarter of 2025
Significant decline in exports of goods as tariffs slow trade with the United States
Exports declined 7.5% in the second quarter of 2025 after increasing 1.4% in the first quarter. As a consequence of United States-imposed tariffs, international exports of passenger cars and light trucks plummeted 24.7% in the second quarter. Exports of industrial machinery, equipment and parts (-18.5%) and travel services (-11.1%) also declined.
Amid the counter-tariff response by the Canadian government for imports from the United States, international imports declined 1.3% in the second quarter, after rising 0.9% in the previous quarter. Lower imports of passenger vehicles (-9.2%) and travel services (-8.5%; Canadians travelling abroad) were moderated by higher imports of intermediate metal products (+35.8%), more specifically, by unwrought gold, silver, and platinum group metals.
Export (-3.3%) and import (-2.3%) prices fell in the second quarter, as businesses likely absorbed some of the additional costs of tariffs by lowering prices. Given the larger decline in export prices, the terms of trade—the ratio of the price of exports to the price of imports—fell 1.1%.
Chart 3
Volumes of exports and imports
Business investment in machinery and equipment contracts in face of tariffs
Overall, business investment fell 0.6% in the second quarter of 2025, led by much weaker investment in machinery and equipment (-9.4%), as every group recorded declines except computers and computer peripheral equipment. Outside of 2020, the first year of the COVID-19 pandemic, this was the slowest pace of investment in machinery and equipment since the end of 2016.
Business investment in non-residential buildings (-3.3%) also decreased in the second quarter of 2025. Meanwhile, the arrival of a high-value import of a module destined for an oil project off the coast of Newfoundland led to a 3.6% increase in engineering structures in the second quarter, bringing overall business non-residential investment to positive growth.
Business non-farm inventories accumulate at faster pace in the second quarter
Business non-farm inventories accumulated at a faster pace in the second quarter (+$30.1 billion) compared with the first quarter (+$10.8 billion). The larger accumulation in the second quarter was led by the manufacturing and wholesale trade industries, as well as by acquisitions of gold and other precious metals by investors. Retail trade industries recorded a slight accumulation of inventories, as withdrawals from inventories of motor vehicles amid shrinking imports dampened the accumulation of other retail durable and non-durable goods.
Chart 4
Change in total and per capita real household final consumption expenditures
Household spending
Household spending increased 1.1% in the second quarter after rising 0.1% in the first quarter. Higher expenditures for new trucks, vans and sport utility vehicles (+5.6%) led the overall increase in the second quarter, followed by insurance and financial services (+1.3%), food (+0.9%) and food and beverage services (+0.9%). These increases were tempered by reduced spending on electricity (-3.2%) and alcoholic beverages (-3.9%).
On a per capita basis, household spending increased 1.1% in the second quarter, after being flat in the first quarter, as population growth eased.
Chart 5
Housing investment
Residential construction up
Residential investments rose 1.5% in the second quarter of 2025, driven by an increase in new construction (+3.7%), as higher work-put-in place and absorptions for apartments, primarily in British Columbia, fuelled growth. Ownership transfer costs, which represent residential resale market activity, rose 1.0% in the second quarter, recovering slightly from a large decline (-16.3%) in the first quarter. In contrast, residential renovations declined 1.1% in the second quarter.
Focus on Canada and the United States
In 2021, 6.0% of government final consumption expenditures in Canada were dependent on imports from the United States. This share represents both direct (3.8%) and indirect (2.2%) imports. Direct imports include purchases of final products, like vaccines. Indirect imports are purchases of goods that are subsequently used in Canadian production, such as food products from the United States that are used to produce prepared meals in Canada.
Chart 6 shows the direct and indirect US import shares for government final consumption expenditures by government subsector for 2021. The US import share of local general governments was notably smaller than that of the federal government and of the provincial and territorial governments because the products they purchase most are imported less than those purchased by other levels of governments. The data are based on special tabulations from the 2021 supply and use tables and trade in value added tables.
For more data and insights on areas touched by the socio-economic relationship between Canada and the United States, see the Focus on Canada and the United States webpage.
Chart 6
United States import shares of government final consumption expenditure by subsector, 2021
Gross domestic product deflator flat in the second quarter
The GDP deflator was flat in the second quarter of 2025, following a 0.7% increase in the first quarter. The decline in export prices in the second quarter was offset by lower prices for imports and higher prices for household final consumption expenditures, particularly services, as well as for government final consumption expenditures.
Chart 7
Gross domestic product price indexes, selected components
Growth in wages slows to lowest rate since 2016, aside from 2020
Compensation of employees edged up 0.2% in the second quarter; this was the smallest increase since the second quarter of 2016 (aside from the pandemic-induced decline in 2020). Wages and salaries were up in construction (+1.2%), federal government public administration (+2.5%) and mining and oil and gas extraction (+2.9%). In contrast, wages fell in finance, real estate and company management (-1.1%) and utilities (-6.1%).
Map 1
Compensation of employees, quarter-to-quarter % change, seasonally adjusted data
Household saving falls as incomes weaken
The household saving rate fell to 5.0% in the second quarter of 2025, down from 6.0% in the first quarter. Disposable income edged up 0.3% in the second quarter, pulled lower by weak growth in salaries and wages, while nominal household consumption expenditures rose 1.2%. Overall, household incomes were relatively weak across several components.
Household property income received rose 0.9% in the second quarter, as a decline in interest earned on deposits, securities and other assets (-1.8%) was more than offset by increases in foreign investment and in dividend income.
As the Bank of Canada held the policy interest rate steady in the second quarter, household property income payments, comprised of mortgage and non-mortgage interest expenses, edged up 0.1%. Mortgage interest paid expanded 0.7%, marking the first quarter of growth following three consecutive quarterly declines. Interest paid on consumer credit products, such as personal loans and lines of credit, ticked up 0.1%.
Corporate surplus falls as the energy sector lowers incomes
Corporate incomes, as measured by gross operating surplus of corporations, decreased by 1.9% in the second quarter, as declines in energy prices and output within the oil and gas sector tempered earnings among non-financial corporations. Income of financial corporations grew in the second quarter, as financial businesses reduced their operating expenses, notably wages and salaries, relative to their output of financial services.
Government net borrowing increases as revenue down following removal of carbon tax
Federal government revenue declined 4.2% in the second quarter, as excise taxes fell sharply following the removal of the federal consumer carbon tax on April 1, 2025. Reduced income taxes from households and withholding taxes on non-residents also contributed to the lower overall revenues for the federal government in the second quarter, while increased revenue from import duties moderated some of these declines.
Expenditures for the federal government increased 1.8% in the second quarter, led by higher purchases of goods and services and wages within the federal non-defence sector. The initial payment for the Robinson Superior legal settlement, increased employment insurance benefits paid, as well as funds provided to cover the current financial difficulties of Canada Post also contributed to the higher expenditures for the federal government in the second quarter.
The result of the lower revenue and increased expenditures was an acceleration in the net borrowing of the federal government in the second quarter.
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Sustainable development goals
On January 1, 2016, the world officially began implementing the 2030 Agenda for Sustainable Development—the United Nations' transformative plan of action that addresses urgent global challenges over the following 15 years. The plan is based on 17 specific sustainable development goals.
Data on gross domestic product, income and expenditure are an example of how Statistics Canada supports the reporting on global sustainable development goals. This release will be used to measure the following goals:
Note to readers
Gross domestic product (GDP) data for the second quarter of 2025 have been released along with updated data for the first quarter of 2025. Updates to the first quarter of 2025 were due to the incorporation of updated source data.
Accounting for tariffs in gross domestic product by income and expenditure accounts
Customs import duties are included in taxes less subsidies on products within the calculation of GDP by income. The estimated value of these duties is derived from Government Finance Statistics data reported to Statistics Canada by the Canada Border Services Agency through the Federal Government's Central Financial Management and Reporting System. The value is presented on a net basis (i.e., import duties paid less any repayments made to importers as part of existing relief programs or remission orders). As new data are received, the estimated value of import duties will be updated accordingly.
As tariffs are paid by importers, prices for final consumption and capital investment expenditures may increase. These price changes will be reflected in the nominal estimates of GDP by expenditure, while the volume estimates would remove the impact of any price changes.
Net estimates of import duties can be found under "Federal general government" within table 36-10-0477-01.
General
Percentage changes for expenditure-based statistics (such as household spending, investment and exports) are calculated from volume measures that are adjusted for price variations. Percentage changes for income-based statistics (such as compensation of employees and operating surplus) are calculated from nominal values; that is, they are not adjusted for price variations. Unless otherwise stated, growth rates represent the percentage change in the series from one quarter to the next: for instance, from the first quarter of 2025 to the second quarter of 2025.
For information on seasonal adjustment, see Seasonally adjusted data – Frequently asked questions.
Revisions to Canada's gross domestic product
To satisfy the opposing goals for both timeliness and accuracy, Statistics Canada regularly updates (revises) its estimates of Canada's GDP. Further details are outlined in the article, "Revisions to Canada's GDP."
Real-time tables
Real-time tables 36-10-0430-01 and 36-10-0431-01 will be updated on September 8, 2025.
Next release
Data on GDP by income and expenditure for the third quarter of 2025 will be released on November 28.
Products
The data visualization product "Gross domestic product by income and expenditure: Interactive tool," which is part of the Statistics Canada – Data Visualization Products series (71-607-X), is now available.
The document "Revisions to Canada's GDP," which is part of Latest Developments in the Canadian Economic Accounts (13-605-X), is available.
The Economic accounts statistics portal, accessible from the Subjects module of the Statistics Canada website, features an up-to-date portrait of national and provincial economies and their structure.
The User Guide: Canadian System of Macroeconomic Accounts (13-606-G) is available.
The Methodological Guide: Canadian System of Macroeconomic Accounts (13-607-X) is available.
Contact information
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