Canadian Economy Rebounds in Q2 with Domestic Demand Strengthening
The Canadian economy has rebounded in Q2, with domestic demand also strengthening. According to RBC's latest analysis, monthly GDP data for June shows a 0.2% increase, aligning with Statistics Canada's earlier advance estimate. This adds to an almost full percentage point increase over April and May.
While the production estimate in Q1 posted a small increase, the expenditure measure saw a second consecutive small decline. However, a broad range of indicators confirm the bounce-back in Q2 growth, including labour market data that have firmed after a slow start to the year.
The strength in Q2's improvement appears broader than just trade rebound, with stronger consumer spending despite higher fuel costs during the quarter. Business investment grew more strongly, driven by a jump in equipment imports, and residential investment has also recovered alongside improving home resales and housing starts.
However, the boost from auto production and net trade in Q2 is unlikely to be repeated in coming quarters, and declining population will continue to weigh on total GDP growth. Trade uncertainty and remaining product-specific tariffs remain a headwind for business investment.