Canada's April-to-June output appears to have climbed faster than anticipated.
In its July outlook, the central bank had called for 2.5% annualized growth in the second quarter. The stronger-than-projected outcome suggests the economy is steadying after a year of stagnation linked to US tariffs. It also calms recession talk: the first quarter had posted a slight decline, marking a second consecutive quarterly drop.
The data come from Statistics Canada's preliminary industry-based estimate, which the agency will refine in its full monthly and quarterly releases. Even so, the figures suggest the economy absorbed the early rounds of US tariffs better than expected, though the next round, threatened for Aug. 19, could test that resilience.
Monthly figures underline the improvement. Output rose 0.3% in May, and StatCan's advance estimate pointed to a 0.2% gain in June. Bloomberg-surveyed economists had been expecting 0.2% growth in May, while StatCan's early estimate had been 0.1%. The actual May reading came in ahead of both forecasts.
Resource extraction was the standout sector in May. Mining, quarrying, and the oil-and-gas complex expanded by 1%, the strongest gain among broad industry categories.
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Goods-producing industries rose 0.6% on widespread gains, while real estate, rental and leasing activity helped lift services-producing industries by 0.2%. Overall, 13 of 20 industry groups recorded growth in May, showing the advance was not confined to energy.
Earlier this month, Tiff Macklem, who leads the Bank of Canada, described firms as adapting to the new trade environment and repeated the central bank's expectation that the economy will keep improving. Yet the latest summary of deliberations from the Bank of Canada shows some officials worry the rebound may not be sustainable.
Crude oil last traded at $85.17, up 1.89%. The rebound comes after a weak first quarter, though the tariff threat remains a key risk.
The stronger growth reading gives Canada some breathing room after a difficult stretch. The Bank of Canada had been watching for evidence that businesses could adjust to a more protectionist US trade policy. Today's data offer that evidence, at least for the moment.
The bigger question is whether the momentum can survive another tariff shock.
The strength in energy has been central to the rebound.
For now, the Canadian economy appears to be growing faster than the central bank expected. That gives policy-makers room to hold off on further action if uncertainties remain, or to respond if the trade environment deteriorates. Investors, however, may stay focused on Washington, where the next tariff decision will determine whether this rebound is the start of a sustained recovery or just a bounce after a rough year.
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