Canada’s economy grew in the three months ending in June, with annualized gross domestic product (GDP) up 3.3 per cent, according to Statistics Canada.
That data also showed officials have revised GDP figures for the first quarter, which had sparked debate over whether Canada had entered a technical recession.
“Canada’s economic growth has shown signs of resilience in the face of immense pressure, which is a relief and perhaps a reason for optimism,” said economist Anupriya Gangopadhyay of the Businesses Data Lab and Canadian Chamber of Commerce in a statement.
“Strong second-quarter GDP growth, alongside an upward revision to Q1, has put recession concerns firmly to rest for now.”
The agency released real GDP figures for June on Friday, which showed the economy expanded 0.3 per cent from May and the second quarter expanded 0.8 per cent from the first quarter.
Real GDP in the first quarter was also revised slightly higher from zero per cent to 0.1 per cent, and on an annualized basis, the first quarter was positive by 0.3 per cent, up from a drop of 0.1 per cent.
Back in May, StatCan reported a marginal annualized decline in first-quarter GDP – a second consecutive quarterly drop that fueled some debate over whether Canada was in a recession. But that quarterly contraction was erased as part of the agency’s regular revisions on Friday.
Those first quarter revisions, Statistics Canada says, was led by higher amounts of non-metallic minerals and energy product exports.
In the second quarter, exports were one of the main contributors to the higher GDP results, with a 3.6 per cent increase — the largest since the first quarter of 2023.
Statistics Canada says the sharpest increase in exports during the second quarter was for passenger cars and light trucks, up 27 per cent, and as auto production in Canada rebounded following declines in the previous six month stretch.
Residential investment was also highlighted by Statistics Canada, rising 2.5 per cent as the real estate market warmed up, and following two consecutive quarterly declines. This included a rise in ownership transfer costs in Ontario, B.C. and Quebec, which the agency says represents resale activity.
Business investment also bounced back in the second quarter by 2.3 per cent after the previous two quarters recorded declines. Statistics Canada says most of the increase in business investment was seen with higher spending on machinery and equipment, as well as investment in computers and computer peripherals like processing units used in data centres.
Household spending was also up by 0.8 per cent in the second quarter, with consumers investing more in products like mutual funds, as well as buying more passenger vehicles and paying higher rent costs. However, some of that household spending was offset by a drop in gasoline and food purchases in the second quarter, which Statistics Canada says was likely in response to higher prices.
The agency says household spending on a per capita basis was up one per cent compared to the first quarter.
Statistics Canada also released an early estimate for July’s GDP result on Friday, which points to zero per cent growth from June, and as new tariff threats from the U.S. put some Canadian businesses on high alert.
“The rebound in business investment saw machinery and equipment spending rise to its highest since Q2 2024, although the recent escalation of trade tensions with the U.S. likely puts this improvement at risk,” said Andrew Grantham, senior economist at CIBC in a statement.
“The advance estimate for July pointed to a stall in activity (0.0 per cent), suggesting that growth was already losing momentum even before new tariff threats were made towards the end of that month before coming into effect in August.”
What the GDP report means for interest rates
Friday’s GDP report marks the final key economic gauge the Bank of Canada will use to determine if it should update its benchmark interest rate, which is scheduled for Sept. 2.
The Bank of Canada aims to strike a delicate balance that ensures the economy is able to expand at a sustainable pace, while also keeping prices relatively stable for consumers and businesses.
The central bank’s governing members meet regularly to determine if its key lending rate should be adjusted or left unchanged based mainly on economic indicators, including reports on GDP, the labour market and inflation.
“Businesses continue to invest as they look for opportunities to diversify into new markets, while household spending remains strong even on a per-capita basis. Combined with recent gains in employment, trade and consumer sentiment, the data could strengthen the case for a rate hike,” said Gangopadhyay.
“However, renewed CUSMA uncertainty and geopolitical risks threaten that momentum. For now, my bet remains on a hold at the next Bank of Canada meeting.”
The benchmark interest rate has held steady at 2.25 per cent since the Bank of Canada dropped it from 2.5 per cent in October 2025.
Governor Tiff Macklem has indicated after recent meetings that key economic indicators are mostly hovering around where they should be, but outside factors like trade tensions with the U.S. and higher oil prices stemming from the Iran war pose risks that could shake up that delicate economic balance.
“Given the recent escalation of trade tensions with the U.S., and with monthly data suggesting that the economy was already slowing even before new tariffs hit, today’s release will be viewed as old news and doesn’t change our forecast for the Bank of Canada to remain on hold,” said Grantham.
– With a file from The Canadian Press