Canada GDP Grows 3.3% in Q2, Fastest Since Early 2023
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Canada's real GDP grew at an annualized 3.3% in the second quarter, the fastest pace since early 2023, Statistics Canada reported Friday. The expansion was driven by exports, household spending, and business investment, while revised data show the economy expanded 0.3% in the first quarter instead of shrinking. The rebound faces new headwinds from 50% US tariffs on $20 billion of Canadian goods that took effect Saturday.
Key Facts
- Canada's real GDP grew at an annualized 3.3% in the second quarter, the fastest pace since early 2023.
- Exports surged 15.1% annualized in the second quarter, the fastest pace in over three years.
- New 50% US tariffs on $20 billion of Canadian goods took effect Saturday after trade talks broke down.
- The Bank of Canada is expected to hold its key rate at 2.25% for a seventh consecutive time on Wednesday.
- Per capita real GDP increased at an annualized 3.8% in the second quarter as Canada's population declined for a third straight quarter.
Growth Drivers
The second-quarter expansion was driven by increases in exports, household spending, and business investment, Statistics Canada reported. Exports surged 15.1% annualized on the quarter, the fastest pace in over three years and after rising 1.3% previously. Revised data show the economy expanded at an annualized 0.3% in the first quarter instead of shrinking, confirming Canada did not experience a technical recession. Per capita real GDP increased at an annualized 3.8% between April and June as Canada's population declined for a third straight quarter, the fastest pace since the end of 2021.
Trade Tensions
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 showed some officials were concerned about the sustainability of an economic recovery beyond the near term.
Monetary Policy Outlook
The Bank of Canada 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%, while a preliminary estimate suggests the economy was flat in July.
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Canada GDP Grows 3.3% in Q2, Fastest Since Early 2023
