Canada Economy Surges 3.3% in Q2 Amid Trade Uncertainty

Canada's economy rebounded sharply in the second quarter after six months of stagnation, driven by strong exports and solid domestic demand. The annualized growth rate of 3.3% was the fastest since 2023, surpassing the Bank of Canada's July forecast of 2.5%. This uptick in economic activity was aided by a 3.6% increase in exports, the largest jump in over three years.

Domestic demand, which had been muted for several quarters due to the trade war with the US, rebounded to 1% in the second quarter. Household final consumption expenditure rose 0.8%, its highest level in three quarters, driven by higher salaries and government benefits. Business investment also sprang back to life, growing at a solid 2.3%.

However, the new round of US tariffs imposed on $20 billion of Canadian exports has injected uncertainty into the outlook. Royce Mendes, managing director and head of macro strategy at Desjardins, noted that households and businesses were beginning to find ways of navigating trade-related uncertainty before the latest tariffs.