Canadian real GDP grew by 0.3 per cent in May after increasing by 0.6 per cent in April. Goods-producing sectors rose by 0.6 per cent, while service-producing industries rose by 0.2 per cent from the previous month. Industry contributors to growth were led by mining, quarrying, and oil and gas extraction (1.0 per cent), construction (0.8 per cent), and public administration (0.6 per cent). Output for the offices of real-estate agents and brokers rose by 5.1 per cent month-over-month. Preliminary estimates suggest that real GDP by industry increased by 0.2 per cent in June. Taking this estimate into account, real GDP is forecasted to grow by 3.4 per cent on an annualized basis in the second quarter, surpassing the Bank of Canada’s expectations. 

May’s report marks a second consecutive month of strong GDP growth, suggesting a sharp rebound in the Canadian economy after contracting for two consecutive quarters. Combined with two straight months of employment growth and enduring strength in consumer spending, the economy is demonstrating resilience in the face of global uncertainties. While a strong GDP print in the second quarter is unlikely to move the Bank of Canada from the sidelines, it does reinforce a slight tightening bias as the Bank looks to bring its policy rate back to the mid-point of its neutral range at 2.75 per cent. However, that bias is weighed against continued geopolitical volatility and tariff threats from the United States that we think will ultimately keep the Bank sidelined through the end of this year.