Canada's Economy Roars Back with 3.3% Growth in Second Quarter

Canada's economy rebounded sharply in the second quarter after six months of virtually no growth. According to data released by Statistics Canada, the country's GDP grew at an annualized rate of 3.3% in the second quarter, the fastest rate since 2023.

This is a significant improvement from the first quarter, where the economy grew at a revised 0.3%. The upward revision means that Canada was not technically in recession.

The strong growth in the second quarter can be attributed to healthy domestic demand, led by consumer spending and business investments. 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% rate in the second quarter, after contracting for over a year. However, general gross fixed capital formation continued to decline with a second-quarter contraction of 2.9%, after shrinking 2.6% in the previous quarter.

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 round of tariffs. However, he warned that the fresh wave of protectionism injects significant uncertainty into the outlook.