Canada’s economy set for second quarter rebound, breaking slump
Canada’s economy is set to rebound sharply in the second quarter amid a spike in oil production, breaking a half-year of stagnation.
By Erik Hertzberg with assistance from Mario Baker Ramirez. June 30, 2026
(Bloomberg) — Canada’s economy is set to rebound sharply in the second quarter amid a spike in oil production, breaking a half-year of stagnation.
Gross domestic product expanded 0.1% in May, according to a flash estimate from Statistics Canada released Tuesday. It rose 0.5% in April, higher than the 0.4% growth expected by economists in a Bloomberg survey, and the fastest pace since July of last year.
Assuming no growth in June, the industry-based output data suggest Canada’s economy will rise at a 2.3% annualized pace in the second quarter, a major acceleration after a half-year of flattened industrial output.
The data will dispel claims that Canada is in the midst of prolonged downturn. In May, the statistics agency reported that expenditure-based GDP contracted for two consecutive quarters starting at the ending of last year, satisfying one condition of a recession.
While most economists and the central bank have rejected that label, U.S. trade policy and an abrupt slowdown in immigration of non-permanent residents have led to weaker, choppier growth. The Bank of Canada expects the economy will be in excess supply through most of 2026.
The two-year Canadian government bond yield rose after the release to 2.733% as of 8:58 a.m. in Ottawa. The loonie was about 0.1% weaker at C$1.4230 per U.S. dollar.
“While a nice rebound for Canada’s economy in April was widely anticipated, this solid result topped almost everyone’s expectations and will presumably silence the recession chatter,” Douglas Porter, chief economist at Bank of Montreal, said in a report to investors.
“Even so, the reality is that output is still up only a little more than 1% from a year ago, which is below potential and still more consistent with monetary policy biased to ease rather than to tighten.”
Thomas Ryan of Capital Economics also said the data should put a firm end to any recession debate. But he added: “Growth over the first half of the year is still set to average considerably below the Bank of Canada’s forecast, supporting our view that rate hikes are a long way off.”
Goods-producing industries rose 1.2% in April, Statistics Canada reported, driven by oil and gas extraction. The increase in petroleum output was due to a rebound in higher synthetic crude oil production, which the agency said followed longer-than-anticipated unscheduled maintenance that tempered growth through the first three months of the year.
Oil and gas extraction also ramped up off the country’s Atlantic coast, coinciding with the global spike in petroleum prices due to the war in the Middle East.
The country’s manufacturing sector expanded 0.6% in April. Construction output rose for the first time in five months. Real estate also grew, reflecting an increase in housing resale activity, the agency said, particularly in Toronto.
“The economy is grinding through a soft patch, but household demand is still providing support to activity, while trade-exposed industries are pointing to a tentative recovery,” Marc Ercolao, economist at Toronto-Dominion Bank, said in a note.
“For the Bank of Canada, this argues for patience rather than a pivot. Firmer near-term growth lowers the urgency to ease, while inflation pressures that remain contained for now give the bank cover to stay on the sidelines.”
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