Canada GDP Beats Forecasts with 0.3% May Growth
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- Statistics Canada reported real GDP rose 0.3% in May, surpassing the agency's own initial estimate of 0.1% growth, with advance estimates pointing to a 3.4% annualized Q2 gain if June grows 0.2%.
- Oil and gas extraction and a resurgent housing market drove May's broad-based growth, recovering from temporary Q1 drags including early maintenance activity and harsh winter weather that chilled home sales.
- Real estate agents and brokers saw activity jump 5.1% in May — the subsector's biggest monthly increase since October 2024 — though CIBC's Grantham cautioned the housing market is 'by no means strong right now.'
- Economists from CIBC, TD, and BMO (Grantham, Ercolao, Porter) argued the Q1 mild contraction overstated weakness, with BMO's Porter saying the truth of Canada's output likely lies in the average between the two quarters.
- Temporary factors including census hiring and FIFA World Cup games in June likely gave Q2 an extra lift, per CIBC's Grantham, and are not expected to be sustained.
- The Bank of Canada held its benchmark rate at 2.25% earlier this month and has been on hold all of 2026, with financial markets pricing a ~97% probability of another hold at the September 2 decision.
- Economists warned U.S. tariff threats from Donald Trump and high fuel costs should chill growth in the second half, with TD forecasting growth cooling back below 2% in Q3 amid new trade headwinds.
Why it matters: With Q2 tracking at a 3.4% annualized pace — well above the Bank of Canada's own revised 2.5% forecast — the central bank has little reason to cut rates, and markets are already pricing a near-certain hold at the September 2 meeting. But the rebound is partly flattered by census hiring and FIFA World Cup boosts, and looming U.S. tariff threats from Trump could reverse momentum in the second half.
