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Economic News

Canada: A Robust Recovery in Q2 GDP

July 31, 2026
LJ Valencia
Economist

Highlights

  • Canadian real GDP rose by 0.3% m/m in May, following an increase of 0.6% in April. This was above Statistics Canada’s flash estimate (0.1%) and the consensus of economic forecasters (0.2%). Goods-producing industries accounted for most of the increase, while services-producing industries grew somewhat more modestly. See Table 1 for further details.
  • Statistics Canada’s flash estimate for June points to a further 0.2% increase (graph 1), due to gains in wholesale and retail trade as well as finance and insurance and real estate offsetting weakness in utilities and agriculture, forestry, fishing and hunting.

 

Comments

The stronger-than-expected real GDP print in May is a welcome sign, with goods-producing industries driving the growth (0.6% m/m). The mining, quarrying, and oil and gas extraction sector led the increase in activity (1.0%). These gains came largely on the back of support activities for mining, and oil and gas extraction (7.3%). Construction expanded for a second consecutive month (0.8%), with higher activity in both residential and non-residential construction. In addition, manufacturing posted an expansion for a second straight month (0.3%), with increases in both durable and non-durable goods manufacturing.

Meanwhile, the services sector rose at a more moderate pace (0.2%) but still marked its fourth uninterrupted month of growth. Public administration grew for the third consecutive month (0.6%). While that was partly due to the nation-wide census, greater activity was seen across all levels of government. Finance and insurance edged higher for the second month in a row (0.3%), supported by strength in banking, monetary authorities and other depository credit intermediation among other subsectors. Transportation and warehousing posted gains (0.3%), mainly thanks to increases in natural gas and crude oil pipeline transportation.

The May print resulted in a third consecutive monthly increase in Canada’s real GDP per capita. That said, more growth will be needed for GDP per capita to eclipse its prior peaks (graph 2).

Implications

Our tracking suggests real GDP growth of around 2.5% annualized in Q2 2026. This is in line with the Bank of Canada’s forecast published in the July 2026 Monetary Policy Report.

Accounting for the June flash estimate, GDP by Industry suggest the economy expanded by around 3.4% annualized. Although this indicator should be interpreted cautiously, as shown in our research External link., its strength alongside other relevant indicators such as retail trade External link. and firmer Q2 job numbers External link., suggests that the economy was in the midst of at least a temporary rebound.

Despite the positive news, elevated uncertainty persists. Geopolitical tensions in the Middle East External link. continue to be a headwind to economic growth and could risk pushing headline inflation higher again. In addition, US trade policy remains a significant unknown. With these risks in mind, the Bank kept rates unchanged in its latest policy announcement External link..  With underlying inflation muted and the economy recovering, we expect the Bank will maintain its current policy mix through the end of the year.

NOTE TO READERS: The letters k, M and B are used in texts, graphs and tables to refer to thousands, millions and billions respectively. IMPORTANT: This document is based on public information and may under no circumstances be used or construed as a commitment by Desjardins Group. While the information provided has been determined on the basis of data obtained from sources that are deemed to be reliable, Desjardins Group in no way warrants that the information is accurate or complete. The document is provided solely for information purposes and does not constitute an offer or solicitation for purchase or sale. Desjardins Group takes no responsibility for the consequences of any decision whatsoever made on the basis of the data contained herein and does not hereby undertake to provide any advice, notably in the area of investment services. Data on prices and margins is provided for information purposes and may be modified at any time based on such factors as market conditions. The past performances and projections expressed herein are no guarantee of future performance. Unless otherwise indicated, the opinions and forecasts contained herein are those of the document’s authors and do not represent the opinions of any other person or the official position of Desjardins Group.