The

Big Six banks’

positive earnings results last week provide signs of a potential resurgence in Canada’s economy, some chief executives say, but what the future brings will depend on the trade deal the country inks with the United States.

Following a record-breaking performance by

Royal Bank of Canada

for the quarter ending July 31, chief executive

Dave McKay

said the bank’s “only caution” sign was that “we want to watch the economy, want to watch the

CUSMA (Canada-United States-Mexico Agreement)

renegotiation” to see what kind of a deal Canada strikes.

“That’s a source of potential volatility going forward,” he said at the Scotiabank Financials Summit in Toronto on Wednesday. “Even though we still remain hopeful of a balanced outcome there that Canada can manage going forward.”

The trade deal has been shielding the economy from the worst of U.S.

President Donald Trump’s tariffs.

“So much of what drove our Q3 results shows stability going forward,” he said. “The crosswinds that can change that, and can change client demand, generate from geopolitical instability and uncertainty. So, let us watch that a little bit over the coming quarter.”

Canada’s economy contracted in the second quarter due to “significant declines” in exports due to U.S.-imposed tariffs on Canadian goods, Statistics Canada said on Friday. The economy shrank 1.6 per cent on an annualized basis, which was worse than economists’ projection of a 0.7 per cent decline, but “broadly in line” with the Bank of Canada’s forecast made in July.

The weaker-than-expected

gross domestic product (GDP)

figures could drive policymakers to cut interest rates in September after keeping the rates steady at 2.75 per cent during their last three meetings, Desjardins economist Royce Mendes said in a note on Friday.

Bank of Montreal

chief executive Darryl White said there has been a “pickup” in the Canadian economy, but it still lags the U.S. He said the sense of uncertainty in Canada has declined from the start of the year, but it still persists.

As an example, he said there’s “some indication of the policy direction,” but there still isn’t a “full understanding” of whether “we are going to preserve” CUSMA.

“The probability is that we do, but I can’t put a high probability on that because you don’t know, and it depends on a lot of things,” he said at the Scotiabank event.

White said there’s a “good narrative” in terms of support for businesses and investments, but “we haven’t seen the term sheet right in order to get the action.” As a result, there’s a “little bit of a pause” in Canada.

“As those uncertainties clear up in Canada, we’ll then see the pickup that we’re now seeing in the U.S.,” he said.

Peter Routledge, who heads the

Office of the Superintendent of Financial Institutions

, also said there’s uncertainty in the economy, but he was confident in the country’s financial system.

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“The Canadian financial sector is very well-equipped to deal with the uncertainty in the broader geopolitical environment, and the financial system in Canada will be an asset as the country adapts to this new environment,” he said at the event.

• Email: nkarim@postmedia.com