Canada's economy just delivered a surprise. Here's what it means for mortgage brokers
Canada's second-quarter growth has come in well above expectations and Bay Street economists are largely in agreement on what it means for the Bank of Canada: nothing is changing.
Real gross domestic product (GDP) rose 0.3% month-over-month in May 2026, according to Statistics Canada, pushing the preliminary annualized estimate for Q2 to approximately 3.4%. That's nearly a full percentage point above the Bank of Canada's own July forecast of 2.5%.
Despite that gap, economists from TD, CIBC, RBC, and BMO all arrived at the same conclusion — the policy rate stays put at 2.25%.
Reports of a recession were greatly exaggerated
The tone from economists was, at times, pointed. Douglas Porter, chief economist at BMO Capital Markets in Toronto, framed May's result as a rebuttal to months of downturn anxiety: "it's now clear that the underlying economy is still grinding ahead, with GDP up 1.7% from year-ago levels."
Porter, who previously told Canadian Mortgage Professional that the Bank of Canada is "on hold for the foreseeable future," revised BMO's full-year GDP forecast up to 0.8% following the release. He also noted that Q3 growth is expected to cool back below 2% as temporary tailwinds unwind.
Marc Ercolao, economist at TD Economics in Canada, was equally clear-eyed about what the data does and does not signal. In his view, May's result "reinforces confidence in the Bank of Canada's view that growth resumed in the second quarter," but does not warrant a policy response.
"Today's report is consistent with our expectation that the Bank has cover to remain on the sidelines for the remainder of the year," he wrote, adding that growth will likely take a breather in Q3 as Census hiring and FIFA World Cup activity fade.
A solid quarter with caveats
Andrew Grantham, executive director and senior economist at CIBC Economics in Toronto, offered perhaps the most measured read. He acknowledged that annualized Q2 growth of 3.4% was "almost a full percent higher than the Bank of Canada's July monetary policy report forecast," but was quick to flag that the headline figure was "flattered somewhat by a reversal of one-off factors" — including below-normal spring maintenance in the oil sector and a temporary lift from 2026 Census hiring.
Looking past those effects, Grantham said the underlying pace of growth is closer to the first-half average of around 1.6% annualized, a rate consistent with only a gradual narrowing of the economy's output gap. "We continue to forecast no change in interest rates this year," he wrote.
Nathan Janzen and Abbey Xu of RBC Economics in Toronto struck a similarly cautious tone. While they noted that "signs of a bounce-back in Q2 growth and stabilization in labour markets are encouraging," they flagged that escalating trade tensions and the latest US tariff announcements pose material downside risks to the outlook, particularly for trade-sensitive industries.
Canadian bond yields rose following the release, though the loonie held largely steady against the US dollar as hotter-than-expected US employment cost data offset the Canadian print.
For mortgage brokers, the practical read is one of continued stability rather than surprise. Economists surveyed after the Bank of Canada's fifth consecutive rate hold on June 10 were already aligned on a prolonged pause, and May's GDP data has done little to shift that consensus.
Growth is resilient enough to justify staying the course, but an elevated unemployment rate, contained core inflation, and a policy rate unchanged for nine consecutive months mean relief is not imminent.
The Bank of Canada's next scheduled rate announcement is September 2.
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