Canada Economy Grows 3.3% in Second Quarter, Fastest Since '23

(Bloomberg) -- Growth in Canada's real gross domestic product accelerated to 3.3% in the second quarter, confirming a strong economic rebound after a yearlong slump brought on by US tariffs and a slowdown in immigration.

The expansion between April and June was driven by increases in exports, household spending, and business investment, Statistics Canada reported on Friday.

Economists surveyed by Bloomberg expected 3.4% annualized growth in the second quarter, in line with Statcan's preliminary industrial estimate.

It's the fastest pace of growth since early 2023, suggesting businesses had begun to adapt to US tariffs, a process the Bank of Canada said it was seeing.

Revised data from the federal agency also shows the economy did not shrink in the first quarter as it first reported, and instead expanded at an annualized rate of 0.3%. That confirms Canada did not experience a technical recession and was on a better footing than previously thought.

Exports surged 15.1% annualized on the quarter, the fastest pace in over three years and after rising 1.3% previously. However, that momentum faces new headwinds amid renewed trade tensions with the US.

New 50% tariffs on $20 billion worth of Canadian goods came into effect Saturday, after trade talks broke down last week between the two countries. Canada plans to hit back with retaliatory levies on Sept. 8, while President Donald Trump has threatened to raise tariffs on Canadian-made vehicles and parts to 50% on Jan. 1.

The Bank of Canada's most recent summary of deliberations also showed some officials were concerned about the sustainability of an economic recovery beyond the near term.

The central bank is set to announce its next interest rate decision on Wednesday and is widely expected to hold its key rate at 2.25% for a seventh consecutive time. While traders in overnight swap markets are pricing in a rate hike by the end of January, the increased trade uncertainty complicates the path for monetary policy once again.

On a monthly basis, real GDP increased by 0.3% in June, outpacing economists' expectation of 0.2%. A preliminary estimate from Statcan suggests the economy was flat in July.

Meanwhile, per capita real GDP increased at an annualized rate of 3.8% between April and June as Canada's population declined for a third straight quarter, marking the fastest pace since the end of 2021.