Canada GDP (May 2026)

Strong Q2 brings rate hikes slightly closer  

The preliminary estimate of a 3.2% annualised rebound in GDP growth last quarter was even stronger than the Bank of Canada’s latest projection from the July Monetary Policy Report and suggests there is some upside risk to our view that the Bank will refrain from rate hikes over the rest of the year. That said, with the latest gain coming on the back of two weak quarters, the chance of the Bank hiking this year still looks low.

The 0.3% m/m rise in GDP in May was much stronger than the 0.1% preliminary estimate. Once again, the mining, quarrying, oil and gas extraction sector led the gains, rising by 1% m/m. This was all down to stronger activity in the oil and gas sector, thanks to a strong rise in support activities and a gain in extraction activity. Stats Can noted that the latter was “relatively elevated for the month of May, given that some of the maintenance work that typically happens in the spring was either completed earlier in the year or deferred” as producers looked to capitalise on higher energy prices. Nonetheless, the strength in GDP growth was ultimately broad-based, with activity rising in 13 of the 20 industrial sectors. Construction activity rose by 0.8%, partly due to a 1.1% rise in engineering and other construction activities, though this likely also reflected higher investment in the oil patch. Activity in non-durable manufacturing (1%) and accommodation and food services (0.8%) also grew strongly.

Meanwhile, the advance estimate for June showed a 0.2% m/m rise, which Stats Can noted was supported by increases in wholesale, finance and insurance and retail trade. This brought the preliminary estimate for second-quarter GDP growth to 3.2% annualised, which is stronger than the Bank of Canada’s projection for a 2.5% rebound in the July MPR. While the monthly GDP by industry data have been a poor guide to the quarterly GDP by expenditure data in recent quarters, our sense is that this is because the GDP by industry data do a poor job at capturing swings in net trade. Given net trade appears to have provided a large boost to GDP last quarter, the GDP by expenditure data may well show even stronger growth when it is released next month.