Canada's economy grew faster than expected in May, and a June advance estimate points to a strong second quarter. The Bank of Canada has already held its benchmark rate at 2.25%, citing improving growth as inflation eases and firms adjust to U.S. tariffs.
Canada's economy grew 0.3% month-over-month in May, beating the 0.2% consensus forecast and marking a second consecutive monthly increase. The expansion was broad-based: 13 of the 20 industrial sectors tracked by Statistics Canada posted gains, with both goods-producing and services-producing industries contributing.
Mining and manufacturing lead the advance
Goods-producing industries expanded 0.6% in May while services-producing industries rose 0.2%. The mining, quarrying and oil and gas extraction sector expanded 1.0%, extending a recovery that began in April, while manufacturing grew 0.3% as most subsectors advanced. According to Reuters, the oil and gas extraction subsector alone rose 0.7% in May because of higher oil sands extraction.
Reuters also reported that Statistics Canada revised April's growth up to 0.6% from an initial 0.5%, the strongest month-on-month gain since July 2025. On the services side, real estate and rental and leasing climbed 0.4%, with every subsector contributing, alongside gains in public administration.
June estimate points to a strong second quarter
Statistics Canada's advance estimate puts June GDP growth at a further 0.2%, supported by wholesale trade, finance and insurance, and retail trade, even as weaker utilities and agriculture partly offset the gains. Combined with May's print, that points to industry-based GDP growth of 0.8% for the second quarter.
Reuters, citing the same flash estimate, put annualized second-quarter growth at 3.4%, above the Bank of Canada's July 15 forecast of 2.5%. That pace would be the fastest annualized rate since the 4.3% increase recorded in the first quarter of 2023.
Bank of Canada holds as outlook improves
The Bank of Canada left its benchmark overnight rate unchanged at 2.25% on July 15, saying growth would strengthen in the second half of the year as inflation pressures eased and firms continued to adapt to U.S. tariffs. Money markets are now pricing in a hold on interest rates for the rest of the year, Reuters reported.
Sources: ActionForex, Economic Indicators News
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