Canada’s economy rebounds sharply in Q2 after six months of stagnation

Canada’s economy staged a robust rebound in the second quarter, expanding at a 2.3% annualized pace after six months of stagnation, according to flash estimates and revised April data released June 30, 2026. GDP grew 0.1% in May following a 0.5% rise in April—outpacing the 0.4% gain forecasted by economists in a Bloomberg survey and marking the fastest growth since July 2025. The rebound was driven by oil and gas extraction, manufacturing, construction, and real estate, contradicting concerns of a prolonged downturn. Oil production surged due to a rebound in synthetic crude output after extended unscheduled maintenance curbed growth in Q1, while offshore Atlantic coast extraction also accelerated amid a global spike in oil prices tied to Middle East conflict. Manufacturing output climbed 0.6% in April, construction snapped a five-month losing streak, and real estate activity rebounded, particularly in Toronto. Despite the strong Q2 rebound, CIBC senior economist Andrew Grantham cautioned it would not fully close the first-quarter output gap, and maintained his forecast for no Bank of Canada rate changes in 2026. The two-year Canadian government bond yield rose to 2.73% post-release, while the Canadian dollar weakened slightly to C$1.42 per U.S. dollar. The data challenges recession claims tied to two consecutive quarters of expenditure-based GDP contraction starting late 2025, though economists and the central bank have dismissed the recession label, citing weaker growth driven by U.S. trade policy and a slowdown in immigration of non-permanent residents.