OTTAWA--Canada's economy has roared back to life, tracking the strongest growth in roughly three years with an expansion in oil and gas activity and continued recoveries in areas like manufacturing.
Industry-level gross domestic product rose 0.3% from the month before in May, building on an upwardly revised 0.6% advance a month prior, Statistics Canada said Friday. The agency's advance data indicates output increased 0.2% in June.
Based on the estimate, the Canadian economy expanded at an annualized pace of 3.4% in the second quarter, which would mark the strongest expansion since the first quarter of 2023. The recovery after two straight quarters of weakness also strongly outpaces the 2.5% growth forecast by the Bank of Canada.
Statistics Canada said the early look at June indicates increases in wholesale, finance and insurance, and retail, partially offset by declines in utilities and agriculture, forestry and fishing. Official expenditure-based data for the month will be released late August.
Industry accounts for May showed growth in 13 of 20 industrial sectors that are tracked, with goods producers expanding 0.6% from a month earlier and services-producing industries rising 0.2%. Compared with a year earlier, overall GDP increased 1.7% in May.
The recovery for Canada comes after no growth in gross domestic product, a broad measure of goods and services produced across the economy, between first quarter of 2025 and the first three months of this year.
The Bank of Canada, for a sixth time in a row, left interest rates steady earlier this month. It has forecast activity will strengthen into next year, with signs that growth is broadening from a reliance on consumer and government spending, though its projection was made before the re-escalation of hostilities in the Middle East and President Trump's latest threat of tariffs on Canadian goods.
Canada's growth in May was for a second straight month led by oil and gas extraction, with increased activity in Alberta's oil sands industry and in support activities for the energy sector. The boost from oil and gas was tempered somewhat by the mining industry, as declines in coal and non-metallic minerals countered higher metal ore mining.
Contraction also increased for a second consecutive month, helped by apartment building, and real estate and rental and leasing expanded a fourth month in a row. Manufacturing, a sector hard hit by tariffs and trade uncertainty over the past year, grew for a second month in a row, thanks in part to a rebound in chemical manufacturing and increases in pharmaceuticals and medicines.
Canada's public sector, which includes education services, health care and social assistance, also continued to expand. This was helped by growth in federal government public administration, coinciding with activity around the 2026 census.
Finance and insurance activity in May increased for a second consecutive month, buoyed by equity and bond markets as uncertainty remained high amid the conflict in the Middle East.
Transportation and warehousing also increased for a second straight month, largely on strength in natural gas and crude oil pipelines.
A summary released this week of the deliberations around the Bank of Canada's last policy meeting reflect a range of views among governing council members about the sustainability of the rebound in the economy beyond the near term. Officials said that although the economy appeared to be adjusting to the shocks it has faced, there remained risk in businesses remaining wary, a possible stalling in the housing market recovery given a large inventory of condos in some cities, and the possibility that consumer spending could weaken if hiring doesn't pick up.