Canadian economy snaps back from winter lull
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- Statistics Canada reported real GDP grew 0.5% between March and April, with a preliminary 0.1% May estimate, pointing to Q2 annualized growth above 2% after Q4 2025 and Q1 2026 each contracted.
- TD economist Marc Ercolao said the April print 'pours a bit of cold water on that technical recession narrative,' arguing the data shows an economy 'regaining its footing' rather than actively sliding.
- Oil and gas contributed about half of April's monthly gain — a rebound larger than expected, with TD suggesting higher oil prices linked to Middle East conflict may have pulled forward production.
- Employment jumped 88,000 positions in May, home resales rose, and the Bank of Canada's June rate-setting council concluded the economy was 'weak' but 'not clearly in recession.'
- Bank of Canada has held its key rate at 2.25% for five consecutive meetings; interest rate swaps price a two-thirds probability of a quarter-point hike by December, though Bay Street economists broadly expect the central bank to stay on hold.
- National Bank chief economist Stéfane Marion warned business investment won't recover without a USMCA deal ahead of the July 1 review, summing up: 'Good news is we're not in a recession, but we're still at stalling speed.'
Why it matters: The April rebound gives economists cover to push back on recession talk, but half the gain came from oil and gas — leaving the broader economy dependent on a USMCA resolution now weeks away. With the Bank of Canada sitting at 2.25% for five straight meetings ahead of its July 15 decision, the question is whether Q2 momentum spreads beyond energy and unlocks the frozen business investment cycle.
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