VIDEO Canadian gross domestic product rose by 3.3 per cent annualized in the second quarter, the fastest quarterly expansion since 2023 . Economists largely expected the growth after a string of data released showed signs the economy was rebounding from a slow start to the year. Statistics Canada also revised the data for the first quarter of 2026, showing the economy actually grew by 0.3 per cent.
Here’s what economists say this could mean:
‘Impressive, but what comes next more important’: CIBC Despite the Canadian economy’s “impressive growth” in the second quarter, 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, Friday’s data will be viewed as old news, said CIBC senior economist Andrew Grantham. He said the GDP numbers don’t change CIBC’s forecast for the Bank of Canada to remain on hold.
StatCan’s slight revisions to historic data for the first quarter GDP revises it into positive territory, so quarterly data no longer show two consecutive quarters of contraction around the turn of the year.
“Impressive, but what comes next (is) more important,” Grantham wrote.
He noted that the strong second quarter growth rate eclipsed the 2.5 per cent estimate from the Bank of Canada’s most recent MPR, suggesting a slightly narrower negative output gap.
However, with early tracking for the third quarter appearing close to the Bank’s 1.5 per cent forecast, and with the recent escalation in U.S. tariffs and related uncertainty clouding the future outlook, Grantham still doesn’t expect the Bank of Canada to move off the sidelines anytime soon, he said.
‘Even better than it looks, but momentum won’t be sustained’: Capital Economics The breakdown of second-quarter GDP growth was even better than the solid 3.3 per cent annualized gain might suggest, said Ariane Curtis, senior North America economist at Capital Economics. However, she said the preliminary estimate of unchanged GDP in July and the headwinds from new U.S. tariffs means it is unlikely that this momentum will be sustained.
The annualized rise in GDP in the second quarter was broadly in line with expectations, though actually a bit soft, Curtis said, but the details were even more encouraging than economists had hoped.
The positive news didn’t end there, she said, with the first-quarter growth also revised up to be marginally positive rather than negative, meaning the economy didn’t suffer a “technical recession ” after all.
“Nonetheless, while the strong gain in June provides a decent handover to the third quarter, we can’t get too excited about the outlook given the latest preliminary estimate suggests that GDP was unchanged in July, as the FIFA World Cup boost went into reverse,” she said.
‘Bounce-back landed as expected’: TD Bank Toronto-Dominion Bank director and senior economist Andrew Hencic said Friday’s data is a welcome result after some nervous handwringing about a fourth quarter contraction and a flat first quarter.
“The second quarter bounce-back has landed as expected,” he said, adding that healthy recoveries were seen across the board, with still solid business investment.
Hencic said the print ultimately shows that growth was roughly 1.8 per cent (annualized) in the first half, with volatility in trade figures muddying the waters.
“The problem going forward is that trade uncertainty is back with new U.S. tariffs now imposed, Canadian retaliation due early next month, and the prospect of further escalation hard to dismiss,” he said.
He added that the newly imposed duties are likely to shave 0.3 to 0.6 percentage points from growth over the next year. This would still leave growth through 2027 in the mid-one per cent range, but further escalation risks dragging this figure lower, he said.
Uncertainty incoming: Desjardins New trade restrictions have cast a fresh shadow over the outlook despite Canada’s economy bouncing back in the second quarter, said Desjardins economist Royce Mendes.
The second quarter ended with a bang, with GDP up 0.3 per cent in June, partly due to economic activity surrounding the FIFA World Cup. As a result, Mendes said it’s no surprise that the flash estimate for July GDP shows no growth occurred during the month, with the tailwind from the World Cup fading.
He also said that it seems like households and businesses were beginning to find ways of navigating the trade-related uncertainty before the latest round of tariffs.
“While it helps that the economy was on stronger footing heading into August, the fresh wave of protectionism injects a significant amount of uncertainty into the outlook,” wrote Mendes.
As a result, he said the rates market has shown little reaction to confirmation that the second-quarter rebound was stronger than the Bank of Canada had projected in July and continues to anticipate that central bankers will remain on the sidelines for the rest of the year.
Rates to hold until 2027: BMO Bank of Montreal chief economist Douglas Porter said the details of the latest data, if anything, were even stronger than the headline. Notably, the so-called technical recession has been sent to the trash bin, as Q1 was revised to a small positive, he said.
While June GDP was a tick above consensus, the flash estimate for July was for a flat reading, a bit better than some of the preliminary monthly figures would suggest, but also before the latest tariff spat kicked off, said Porter.
“The third quarter is thus off to a tougher start, and it won’t get easier in August and September with the wave of downbeat headlines,” he said.
Porter said that Friday’s data was impressive overall, there’s not a lot to seriously move the needle bigger picture for the Bank of Canada. The economy was better than the Bank expected in the second quarter and appeared to be picking up steam, but the sluggish start to the third quarter and the trade flare-up cast a dark cloud over the near-term outlook.
The Bank of Canada will likely wait and see how the economy handles the latest tariff spat — and how the tussle develops — before judging where rates need to go next, he said.
“Look for the BoC to be on hold into 2027” wrote Porter. “That posture could last well into next year depending on how the trade backdrop unfolds and just how growth and inflation respond to the tariffs and counter-tariffs.”
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