Canada’s financial system grew at an annualized tempo of two.2% within the first quarter of 2025, outpacing expectations and matching the expansion charge from This fall 2024. On a quarterly foundation, actual GDP rose 0.5%, whereas per capita GDP climbed 0.4%, constructing on a modest 0.1% achieve within the earlier quarter.

The quarterly achieve was largely pushed by progress in complete exports (+1.6%) and the buildup of enterprise non-farm inventories, in accordance with the company. On an annual foundation, enterprise funding rose a strong 4.0%, regardless of ongoing tariff-related uncertainty going through Canadian companies.

The upside was partially offset by a 2.8% drop in residential funding, pushed by an 18.6% decline in possession switch prices—an indicator of resale market exercise. It marked the steepest drop since Q1 2022.

Closing home demand—which captures complete consumption and funding in mounted capital—was flat in Q1, posting no quarterly progress for the primary time since late 2023.

Advance knowledge from StatCan means that actual GDP rose one other 0.1% in April, supported by beneficial properties in mining and finance, although partly offset by continued weak point in manufacturing.

“The Canadian financial system appears to be like to have held up fairly effectively within the opening months of the commerce struggle, and even the latest (estimate) for April suggests progress is weathering the commerce storm,” wrote BMO’s Douglas Porter.

Economists Warren Beautiful and Noah Black with National Bank spotlight an unsung driver of GDP power: social safety. Whereas the federal authorities posted a $62-billion deficit over the previous 4 quarters—equal to 2% of GDP—Canada’s public pension applications (CPP/QPP) “delivered a seasonally adjusted surplus (nationwide accounts foundation) for a 103rd straight quarter,” Beautiful and Black wrote. 

They describe this surplus as a “fiscal lynchpin” for Canada, serving to to offset gross debt and bolster monetary reserves throughout authorities sectors. By their estimate, Canada now holds basic authorities monetary property equal to 100% of GDP—thanks in no small half to constant contributions from social safety.

Stronger progress dims prospects for a BoC charge lower

Canada’s newest month-to-month GDP figures additionally strengthened the financial system’s underlying resilience regardless of ongoing tariff uncertainty.

Actual GDP edged up 0.1% in March, pushed by a 2.2% achieve in mining, quarrying and oil and fuel extraction. Manufacturing, as anticipated, slipped 0.4% on the month and was down 0.7% year-over-year.

Collectively, the quarterly and month-to-month outcomes level to a sturdier-than-expected financial system within the face of exterior headwinds. In response to CIBC‘s Andrew Grantham, whereas the composition of Q1 progress wasn’t notably robust, “total it seems that the Canadian financial system is faring higher than we beforehand anticipated.” That, they add, offers the Financial institution of Canada extra time to evaluate incoming knowledge and helps preserving charges on maintain for now.

Monetary markets had already priced in little probability of a charge lower at subsequent week’s assembly. In consequence, at the moment’s upside shock had solely a muted market influence, with the Canadian greenback ticking increased and the 5-year bond yield largely regular at 2.82%.

Nonetheless, some economists are revising their forecasts.

“Whereas we are able to actually quibble across the particulars, the Financial institution of Canada will certainly seize on the headline end result in addition to the respectable achieve for April,” mentioned Porter. “With this sturdy set of outcomes, we’re formally abandoning our name of a charge lower subsequent week, and now search for the subsequent charge trim eight weeks therefore on the late-July determination.”

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Final modified: Might 30, 2025