Canada’s economy expanded by 0.2% in July, rebounding from three straight months of contraction as mining, manufacturing, and wholesale trade lifted output, official data showed.

The recovery followed a 1.6% annualised decline in GDP during the second quarter, fuelling concerns of a possible recession. Two consecutive quarters of contraction are widely regarded as a technical recession. A preliminary estimate suggested August GDP was flat, with gains in services offset by weakness in goods-producing industries.

Analysts had forecast a 0.1% gain for July, after a 0.1% fall in June. “Through the monthly volatility, Q3 GDP is tracking a 0.8% annualised rate, which is better than where it was tracking before today’s release,” CIBC economist Andrew Grantham said.

The Bank of Canada has warned that US tariffs and trade disruptions are weighing heavily on key sectors, dampening investment and risking broader spillover effects.

Goods-producing industries, which account for about a quarter of GDP, grew 0.6% in July, their first gain in four months. Mining, quarrying, and oil and gas extraction rose 1.4%, while manufacturing—vulnerable to tariffs—expanded 0.7%.

Services-producing industries, making up three-quarters of the economy, inched up 0.1%, supported by wholesale trade and transportation, both rising 0.6%. Pipeline transportation surged 2.8%, its strongest growth since September 2022.

The data suggest Canada may avoid recession in the short term, though trade headwinds remain a major drag on momentum.