Canada’s GDP Pops in Q2 Amid Export Recovery and Solid Consumer Spending  

• The Canadian economy bounced back in Q2 2026 rising 3.3% (q/q annualized), coming in a smidge below the consensus forecast (3.4% q/q). First quarter GDP growth was also revised higher from -0.1% to +0.3% q/q.
• Net trade was a significant lift on growth. Exports jumped 15.1% q/q (annualized) while imports rose a muted 1.1%. The rise in exports was driven by an increase in passenger car and light truck volumes, that came on the heels of a rebound in auto production.
• Consumer spending grew 3.3% q/q (annualized) in Q2, building on a solid 2.4% in Q1. The gain was driven by increased spending on financial services (specifically mutual funds and other investment services), passenger vehicles and rent. Weaker spending on gasoline and food provided an offset.
• Residential investment jumped 10.4% q/q (annualized), almost reversing last quarter’s 10.6% decline. A bounce-back in resale activity in Ontario, Quebec and B.C., along with stronger apartment construction in B.C. helped drive growth.
• Non-residential structures, equipment and machinery investment rose a healthy 12.3% q/q (annualized). After two quarters of decline engineering structures investment flipped back to growth, while machinery and equipment investment also registered a gain. Investments in computers and computer peripherals rose 85% q/q (annualized) on higher imports of processing units (the types used in data centers).
• Government consumption spending rose 3.8% q/q (annualized) while government investment dropped 11.0% q/q annualized, continuing the reversal from the very strong gains in Q4 (24.6%).
• On the monthly side, June industry GDP reported a 0.3% month-on-month (m/m) advance, while July’s flash estimate shows no growth to start Q3.

Key Implications

• The second quarter bounce-back has landed as expected. Healthy recoveries were seen across the board, with still solid business investment. Ultimately this print shows that growth was roughly 1.8% (annualized) in the first half, with volatility in trade figures muddying the waters. This is a welcome result after some nervous handwringing about a fourth quarter contraction and a flat Q1.
• The problem going forward is that trade uncertainty is back with new U.S. tariffs now imposed, Canadian retaliation due early next month, and the prospect of further escalation hard to dismiss. As we’ve written, the newly imposed duties are likely to shave 0.3 to 0.6 percentage points from growth over the next year. This would still leave growth through 2027 in the mid-1% range, but further escalation risks dragging this figure lower.