Canada’s economy grew a strong 3.3% annualized in second quarter, as first quarter revised higher

Linamar employees assemble components of a light truck transmission on the floor of a Linamar factory, in Guelph, Ont., on Feb. 6, 2025. Exports of autos helped boost GDP in the quarter. (Evan Mitsui/CBC)

CBC News with files from Reuters and The Canadian Press

The economy grew at an annualized rate of 3.3 per cent in the secondquarter. For the month of June, GDP was up 0.3 per cent.

Exports rose 3.6 per cent according to the data agency, largely because of higher auto exports.

Residential investment also helped boost the economy, as did investment by business owners, who spent more on machinery and equipment in the second quarter. Business capital investment was up 2.3 per cent in the second quarter, snapping a streak of five consecutive quarters of decline.

Investments in computers and peripherals jumped 16.7 per cent in the second quarter, which StatCan said was related to the kinds of processing units used in data centres.

And, corporate incomes rose in the second quarter largely thanks to the energy sector, boosted by higher gas prices. The high cost of gas also acted as a drag on earnings for manufacturing firms, which saw their input costs rise.

Quarterly change in GDP in Canada.

Photo: Statistics Canada(Graeme Bruce/CBC)

On the consumer side, household spending rose 0.8 per cent as consumers invested more and spent more on cars and rent.

For the month of June, growth was solid across a number of industries. Some tourism and hospitality sectors got a lift from Canada hosting 10 games in the FIFA World Cup in June, the agency said, while manufacturing expanded for a third straight month.

Technical recession in the 'trash bin'

Earlier this year, Statistics Canada data indicated the Canadian economy shrank marginally in the first quarter, raising debate about whether the country was in a technical recession. (new window)

But in today's release, the data agency revised the first-quarter results, showing that GDP in the first quarter was actually slightly positive at 0.3 per cent annualized.

With the revision and the strong second quarter growth, BMO economist Doug Porter says the so-called technical recession has been sent to the trash bin.

But looking forward, things could get a lot rougher, he said.

Initial estimates for July indicate growth was flat. And trade war tensions with the U.S. paint a challenging picture of what's to come.

The third quarter is thus off to a tougher start, and it won't get easier in August and September with the wave of downbeat headlines, Porter wrote in a note to economists.

The release comes just before the Bank of Canada's next interest rate decision next week, on Sept. 2, where Porter predicts the central bank will hold the rate at 2.25 per cent, waiting to see how the tariff spat plays out in the economy before making any changes.