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Canadian Economy Showing Resilience in the Face of Uncertainty

Canadian Economics

By: Walter Bolduc

Real gross domestic product (GDP) was up 0.1 per cent month-over-month in March following a 0.2 per cent contraction in February. For the first quarter as a whole, real GDP rose by 0.5 per cent.

  • Advanced estimates for April’s GDP indicate 0.1 per cent growth for the month. Mining, quarrying, and oil and gas extraction are estimated to have partially offset a drop in manufacturing activity.
  • Exports performed well in the first quarter, increasing 1.6 per cent. The increase was driven by exports of passenger vehicles and industrial machinery, equipment and parts, which outweighed a decrease in energy exports, and a reflection of businesses and consumers in the U.S. trying to get ahead of tariffs.
  • Like exports, imports posted a healthy gain, rising 1.1 per cent. Passenger vehicles and industrial machinery, equipment and parts also led imports. Meanwhile, travel imports dropped 7.0 per cent as fewer Canadians travelled south of the border.
  • Household spending rose 0.3 per cent over the first three months of 2025, a significantly more modest pace than the 1.2 per cent recorded in the final quarter of 2024. Per capita spending increased 0.1 per cent.
  • Residential investment decreased 2.8 per cent. Gains in new construction and renovations were dwarfed by an 18.6 per cent decline in ownership transfer costs, reflecting softer resale activity.
  • Non-residential business investment rose 1.0. Declines in construction activity were offset by a solid gain in investment in machinery and equipment.
  • On a monthly basis, goods producing sectors grew 0.2 per cent in March, compared to 0.1 per cent growth in the services-producing sectors.
  • The oil and gas extraction sector was the largest contributor to growth in March. East coast crude petroleum extraction resumed after last month’s disruption, resulting in 2.0 per cent growth in the industry.
  • Construction was another industry highlight in March, with the industry expanding 0.5 per cent. Residential building construction led the increase (+1.3 per cent), as greater activity in the construction of both single and multi-unit homes rose.

Insights

Confidence still shaken. The U.S. administration’s volatile on again, off again trade policy has been exacerbating uncertainty, weighing heavily on Canadian consumer and business sentiment. In March, consumer confidence fell to its lowest level ever, while business confidence fell to its lowest point since the start of the pandemic. Unsure how to react, some businesses are adopting a wait and see approach to investment. Consumers, meanwhile, are clearly concerned about their finances and future job prospects, and are likely to curb discretionary spending as a result.

Economy shows resilience in April, but risks are still lurking. April’s preliminary numbers show that the Canadian economy expanded 0.1 per cent for the month, a more positive result than expected. However, the second quarter of 2025 still faces plenty of uncertainty. In addition to continued risks surrounding trade policy, wildfires may make matters worse in some parts of the country, as Natural Resources Canada is forecasting a bad wildfire season in 2025. The impacts are already being seen in Manitoba, with thousands of residents in the province ordered to evacuate early this week due to the province’s wildfire emergency. Wildfires have the potential to considerably hurt output in the natural resources sector, but the impacts are likely to be much broader if they lead to evacuations like we are seeing in Manitoba.

To learn more about Canada’s economic outlooks for the long-term or the next five year’s, please consult our Canadian Outlook.

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