A new Canadian GDP report has arrived just in time for Canada Day.

Canada’s economic growth returned to positive territory in both April and May (advance reading), following two straight quarterly declines.

The headline numbers show that April real GDP gained 0.5%, while the advance reading for May points to a 0.1% increase.

Industry details for April:

Goods-producing industries (+1.2%) drove April’s gain.

• Mining, quarrying, and oil and gas extraction: Rose by 2.9%, the largest monthly gain in over two years, and accounting for about half the headline increase. The oil sands sector expanded 6.6% as synthetic crude oil production rebounded following previous unscheduled maintenance.
• Construction: Grew by 0.7%, the first increase in five months.
• Manufacturing: Up 0.6% after a string of weak performances. This sector has been hampered by sector-specific tariffs (GDP in primary metals, lumber, and auto manufacturing all remain below January 2025 levels).

Services-producing industries (+0.3%)

• Widespread gains—notably in real estate, transportation and warehousing, finance and insurance, and public administration—helped offset declines in wholesale trade and professional services.

Bottom line

It’s not worthy of a World Cup game celebration, but we’ll take it. Today’s report comes after two straight quarterly declines in GDP and a month-long debate over whether we’re in a recession or not (our view: it’s not an actual recession and this report should quiet the recession chatter, but a sign of economic weakness and long-term structural issues - more below).

When combined with May’s solid job gain, today’s report shows that the Canadian economy still has some life. While the monthly GDP report is not always a reliable gauge of quarterly results, the economy is on pace for annualized growth of over 2% in the second quarter (assuming June comes in flat).

Further, Canada’s GDP is growing again on a per-person basis, even if that’s in large part due to a shrinking denominator.

But let’s leave the champagne on ice for now, as we put today’s data into historical context. Growth is returning in the second quarter, but this comes after declines in three of the past four quarters. The economy is now making up for lost ground.

More importantly, we are still looking for evidence that long-term structural issues (see playing less injured below) are getting resolved. So far, the consumer has been doing too much of the heavy lifting (retail trade GDP was flat in April, but this comes after an annualized gain of 3.5% in Q1).

What’s next?

Corner kick. A one-time tourism bump can be expected from the World Cup festivities in June/July. Food and accommodation services are poised for a temporary lift.

Playing less injured. Our eyes are squarely on whether the struggling components of GDP—exports and investments—will return to the field. The consumer has been resilient, providing an offset to a challenging trade environment for business. But consumer spending will be put to the test by a declining population, wobbly labour market and higher energy costs. As the tariff shock wears off, and businesses adjust to the new trade environment, we expect to see exports grinding higher but still being challenged. The Bank of Canada is also banking on more investment and exports in their latest forecast.

Game time decision. The Canada-United States-Mexico Agreement (CUSMA) review is slated to start tomorrow, though President Trump does not appear to be in a rush. An optimistic take is a positive renewal, extending the agreement for 16 more years. But we think a more likely scenario is no renewal, ushering in annual reviews. Our base case is that sector tariffs remain in place, but with the CUSMA exemption retained. That is, no better or worse, but the same. Still, compared to last year’s tariff turmoil, a period of relative stability.

Also coming soon, Alberta will announce its submission of the proposed West Coast oil pipeline to the federal Major Projects Office on July 2. The federal government will then have until October 1 to designate it as a project of national interest.

Will a ringer enter the field? Canada could use the assistance of the “made in Canada” playmaker to kickstart growth. The largest upside comes from accelerating major projects that have been promised, but with shovels waiting to hit the ground. Lofty investment goals (Carney’s plan is to catalyze $1 trillion over five years) are not yet showing up in the data, with real business investment falling 1.9% y/y in Q1 2026. Going back further, investment is still 16% below its Q4 2014 peak.*

On the sidelines. Don’t expect the Bank of Canada to react too much to this report. The economy is only now making up for lost ground, and inflation is too high. We continue to see the Bank of Canada on hold next month and for the remainder of the year.

*Real non-residential business investment in structures and machinery and equipment.

Answer to the previous trivia question: It’s true: The first trilateral CUSMA Free Trade Commission meeting for the joint review is taking place virtually rather than in person.

Today’s trivia question: Connecting Canada to more than 170 international markets, in what city is the country’s busiest port?