Canada’s real gross domestic product grew by 0.3 per cent in May and early estimates show the economy expanded again in June, as a second quarter rebound gained steam.

May’s gains were mainly driven by the mining, quarrying, and oil and gas extraction sectors, which grew by one per cent month over month, Statistics Canada said. Manufacturing and construction also showed strength in May.

Statistics Canada’s flash estimates suggest the economy grew by 0.2 per cent in June led by increases in wholesale and retail trade as well as finance and insurance. Including the June estimate, officials said the economy likely expanded by 0.8 per cent in the second quarter for an annualized growth rate of 3.4 per cent.

Economists had largely expected the economy to improve in the second quarter of 2026, after it contracted by 0.1 per cent on an annualized basis in the first quarter.

“If you combine May’s data with advanced estimates for June, it would be the strongest performance seen in 13 quarters,” said Matthieu Arseneau, deputy chief economist for the National Bank of Canada.
“Economic growth is also occurring when the population is contracting, so it’s even more impressive.”

Ranella Billy-Ochieng, a senior economist for TD Bank Economics, said the broad-based economic growth was “really encouraging,” with 13 out of 20 industrial sectors contributing to growth in May.

“We are seeing some of the shocks taking place in the Canadian economy actually fading,” she said.

However, Arseneau and Billy-Ochieng warned the Canadian economy is not out of the woods yet.

Billy-Ochieng said monthly and quarterly GDP data can be very volatile, and that it’s more important to focus on long-term trends.

“What we want to see going forward is sustained momentum and sustained broad-based participation in growth,” Billy-Ochieng said.

Arseneau noted that the economy is still experiencing excess supply following weakness over the past year, and uncertainty remains elevated amidst the threat of additional tariffs and Canada-U.S.-Mexico Agreement negotiations.

He added that a lot of the boosts to the economy seen in May — the FIFA World Cup, severance payments to federal public service workers and government activities related to the census — were temporary, and higher energy prices caused by re-intensification of the war in Iran could lead to lower consumer spending.

“A moderation in economic activity is therefore to be expected in the coming months once these temporary factors subside,” Arseneau said.

“The political situation is the most important driver and we will continue to follow developments on these fronts.”

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Despite the headwinds, both economists noted that the data is trending in the right direction.

Canada’s real GDP per capita increased by 0.2 per cent in the first quarter of 2026 while the 12-month diffusion index — a metric that shows how many individual industries are contracting or growing and an indicator of the pervasiveness of economic trends — is also seeing positive improvement.

“When we adjust for changes in the population, when we consider changes in the population, the GDP story is not as dire as some of the headline numbers showed, at least for Q1,” Billy-Ochieng said.

“(The diffusion index) is the first healthy sign that the growth picture is durable and it’s not just one outperforming sector hiding weaknesses everywhere.”

• Email: ptran@postmedia.com