EconoFACTS

June 30, 2026 | 09:09

Cdn. Real GDP — Technical Recovery?

Economist

Douglas Porter , CFA

Chief Economist and Managing Director
Economics

Douglas Porter brings more than three decades of experience analyzing gl... (Read more)

Douglas Porter , CFA

Chief Economist and Managing Director
Economics

Douglas Porter brings more than three decades of experience analyzing gl... (Read more)

Remember all that talk about a recession a month ago? Yeah, never mind...

Canadian real GDP rose by a sturdy 0.5% in April, and the early read on May is for a further 0.1% gain. The strong April advance—it was actually +0.547%, so nearly up 0.6%—was the second fastest rise in the past two years, was above consensus, and even managed to top the flash estimate of +0.4%. This helps wash away the bad taste of two small quarterly declines in Canada's economy around the turn of the year—although after the big downward revisions by StatCan in the past quarterly release, we will curb our enthusiasm for now on this result. Still, it is fair to say that Q2 started on a solid footing, and there is substantial upside to our estimate of 1.0% GDP growth in the quarter which ends today; if these numbers hold, Q2 is on track for growth of over 2%.

The rebound in April from a small dip in March was broadly based as 14 of 20 groups were up, including strong gains in a wide array of industries. Leading the way was a big 3.7% rebound in oil production, with large growth in both oilsands and conventional output. Natural resources could have been even stronger if not for maintenance in "other metal ore mining" and a resulting 28.3% fall there. Meantime, manufacturing, construction, rail transportation and pipeline activity all rebounded in sync, as the Canadian economy seemingly shook off the winter blues all at once. As a result, the goods-producing sectors rose by a robust 1.2% m/m, but with a nice assist from services, which rose 0.3% m/m. Overall, the snap-back left GDP up 1.1% from year-ago levels, quite a different picture from the reported 0.1% y/y dip in Q1 from the quarterly results a month ago.

The bounce in April is clearly a correction from the prolonged winter lull and is unlikely to persist. Still, it's good news that May likely saw at least some further gains, which will leave output up 1.3% from year-ago levels. May's gain looks to be led by services, with notable strength in finance and insurance, but a pullback in wholesale trade. A more moderate gain in May GDP will serve as a reminder that Canada is still growing slower than potential, so no one should mistake the April bounce as a sign of a robust economy. Nevertheless, it's also clear that the small two-quarter dip in output was a false alarm on the recession watch.

Bottom Line: While a nice rebound for Canada's economy in April was widely anticipated, this solid result topped almost everyone's expectations and will presumably silence the recession chatter. The broad-based nature of the snap-back is especially encouraging. Even so, the reality is that output is still up only a little more than1% from a year ago, which is below potential and still more consistent with monetary policy biased to ease rather than to tighten.

Table 1 - Canada — Monthly Real GDP

(month/month % change)

Source: BMO Economics, Haver Analytics