Canadian GDP posts strongest growth since 2023, erasing technical recession
Canada’s real Gross Domestic Product (GDP) expanded 3.3% quarter over quarter annualized in the second quarter, just shy of consensus expectations of 3.4%. The result marked the strongest pace of growth since 2023 and came in well above the Bank of Canada’s (BoC) own July projection of 2.5%. The report also included a notable revision, with first quarter growth lifted to 0.3% from an initial 0.1% contraction — meaning the technical recession previously believed to have occurred no longer appears in the data. Growth was broad-based, driven by a 15.1% jump in exports, a 3.3% rise in household consumption, and a 12.3% increase in business investment, while June’s monthly GDP reading rose 0.3%.
Why this matters: The strength of the rebound, arriving even as the U.S. imposed fresh tariffs and Canada prepared its own retaliatory measures, underscores the resilience of domestic demand. With growth running well above the BoC’s own projections, the data may keep the possibility of further rate increases on the table later this year, though considerable uncertainty remains given the ongoing tariff backdrop and its potential impact on trade-exposed sectors in the quarters ahead.
Fed’s Warsh signals more work ahead as inflation remains sticky
U.S. inflation showed little acceleration in July, with the Personal Consumption Expenditures (PCE) price index holding at 3.7% year over year and core PCE unchanged at 3.3% — both well above the Fed’s 2% target. Chair Kevin Warsh used his first Jackson Hole keynote to reinforce that the central bank is not yet satisfied, saying he would be “hard pressed” to describe financial conditions as restrictive and that the Fed’s predominant focus should be on prices.
Why this matters: Warsh’s remarks, combined with the firmer-than-expected inflation data, prompted markets to raise the odds of a September rate hike to 57.5%, up from 35.4% beforehand, according to CME FedWatch. While Warsh declined to offer explicit forward guidance, his tone suggests the Fed remains focused on bringing inflation back to target before shifting its policy stance.
| Index† | Change (%) | Index Level | |||
|---|---|---|---|---|---|
| Week | MTD | YTD | 1 Yr | ||
| Treasury Bill | 0.05 | 0.18 | 1.48 | 2.37 | 194 |
| Canadian Bonds | 0.29 | -0.24 | 0.41 | 2.29 | 1,205 |
| Canadian Equities | -0.17 | 3.87 | 16.92 | 31.59 | 36,554 |
| U.S. Equities | 0.50 | 3.06 | 13.49 | 19.98 | 7,712 |
| International Equities | 0.11 | 2.42 | 14.80 | 22.45 | 3,246 |
| Emerging Market Equities | 0.05 | 3.56 | 24.53 | 39.56 | 1,722 |
| European Equities | 0.11 | 1.15 | 13.72 | 22.06 | 219 |
| Currencies† | Change (%) | Exchange rate | |||
|---|---|---|---|---|---|
| Week | MTD | YTD | 1 Yr | ||
| C$/US | -1.03 | 0.84 | -1.29 | -1.11 | 0.72 |
| C$/Euro | -0.19 | 0.34 | 0.08 | -0.29 | 0.62 |
| C$/Pound | -0.19 | 0.42 | -1.74 | -1.28 | 0.53 |
| Commodities (US$)† | Change (%) | Price | |||
|---|---|---|---|---|---|
| Week | MTD | YTD | 1 Yr | ||
| WTI Crude Oil ($/Barrel) | -4.20 | 2.34 | 46.44 | 33.35 | 83 |
| Gold ($/oz) | -3.22 | 10.30 | 0.72 | 25.16 | 4,530 |
Treasury Bill is represented by the FTSE Canada 60 Day T-Bill Index (C$), Canadian Bonds represented by the FTSE Canada Universe Bond Index (C$), Canadian Equities represented by the S&P/TSX Composite TR Index (C$), U.S. Equities represented by the S&P 500 TR Index (US$), International Equities represented by the MSCI EAFE GR Index (US$), Emerging Market Equities represented by the MSCI EM GR Index (US$), European Equities represented by the MSCI Europe Index (€). It is not possible to invest directly in an index. Assumes reinvestment of all income and no transaction costs or taxes.
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