CDN NEWS | 
US NEWS 
The Canadian economy is on track to post a stronger-than-expected rebound in the second quarter, partly because of surging energy production.
A preliminary estimate suggests real gross domestic product expanded at an annualized rate of 3.4% between April and June, according to Statistics Canada’s industry-based output data.
The oil industry had its highest crude production volume for the month of May since at least 2016, the agency said. Canada is enjoying strong demand because the US-Iran war is reducing supply coming out the Middle East. Extraction from the western oil sands was up 12.4% from the same month last year.
The Bank of Canada’s July monetary policy report projected a growth rate of 2.5% in the second quarter, though that estimate is based on expenditure measures.
The rebound suggests the economy is stabilizing after a year of stagnation brought on by US tariffs and weaker population growth. It’s also likely to end talk of a Canadian recession after back-to-back contractions in the last quarter of 2025 and the first quarter of this year. If the quarterly estimate materializes, it would mark the strongest pace of growth since early 2023.
Source: Statistics Canada
“After all the collective angst about a possible technical recession just a few months ago, it’s now clear that the underlying economy is still grinding ahead, with GDP up 1.7% from year-ago levels — just shy of its 20-year average growth rate,” said Bank of Montreal Chief Economist Doug Porter in a client note.
The economy grew 0.3% in May, beating expectations for 0.2% growth. Statistics Canada also gave an advance estimate that the economy expanded 0.2% in June.
The Canadian dollar dropped to a session low against the US currency after the release, falling as much as 0.3% to trade at 1.4050 per US dollar before paring losses. The loonie is still up this week. Bonds sold off across the curve, with the two-year note touching almost 2.93%.
‘Thriving’ Economy
Goods-producing industries grew by 0.6% amid broad-based gains. Meanwhile, growth in real estate and rental and leasing drove a 0.2% expansion in services-producing industries. Mining, quarrying and oil and gas extraction posted the strongest growth in May, expanding by 1%.
“The economy is not just surviving, but thriving,” Andrew Dicapua, an economist with the Canadian Chamber of Commerce, said by email. “And it’s not just an energy story this time, with interest-rate sensitive sectors reviving.”
Overall, 13 out of 20 industries grew in May. Andrew Grantham, an economist with Canadian Imperial Bank of Commerce, said some of the strength could prove temporary.
“Growth was flattered by a reversal of some one-off factors (i.e. oil maintenance, weather disruptions) that negatively impacted the first quarter, as well as potentially some positive contributions related to the FIFA World Cup,” he said.
Bank of Canada Governor Tiff Macklem said earlier this month that businesses are adapting to the new trade reality and that the central bank expects the economy to continue recovering.
However, some Bank of Canada officials are concerned about the sustainability of a rebound, according to the central bank’s latest summary of deliberations.
US President Donald Trump reignited trade uncertainty earlier this month when he threatened to impose new tariffs on some Canadian goods, set to take effect on Aug. 19.
David-Alexandre Brassard, chief economist at CPA Canada, said the number is unlikely to change the Bank of Canada’s course.
“Now we’re facing headwinds, tariffs threats,” Brassard said on BNN Bloomberg Television. “Uncertainty is, sadly, back on the menu. So investment intentions, which were looking good at the last survey, are probably not going to materialize to the degree we wish they would.”
StatCan is scheduled to release its expenditure-based GDP report for the second quarter on Aug. 28.
— With assistance from Mario Baker Ramirez, Anya Andrianova, and Erik Hertzberg
Share This:
