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Economy Slightly Contracts in April

Canadian Economics

By: Viktor Cicman

Real gross domestic product (GDP) was down 0.1 per cent month-over-month in April following an increase of 0.2 per cent in March. The losses were concentrated in the goods producing sector, which fell by 0.6 per cent. Service-producing industries increased by 0.1 per cent.

  • The biggest drag on the economy was the manufacturing sector. The sector was down 1.9 per cent in April, the largest drop since April 2021, reflecting broad declines across both durable and non-durable goods subsectors.
  • Motor vehicles were the largest contributor to the decline in manufacturing. In April, exports of motor vehicles and parts declined 17.4 per cent, leading to a 5.2 per cent decline in output. During the month, some motor vehicle manufacturers scaled back production amid tariffs imposed on motor vehicle exports to the United States.
  • Aside from manufacturing, wholesale trade saw the largest drop in output in April, falling by 1.9 per cent with broad-based declines. The largest contributors to the slowdown in growth were motor vehicle wholesalers, along with distributors of motor vehicle parts and accessories, as both exports and imports declined in April.
  • The finance and insurance sector rose in April, by 0.7 per cent, despite uncertainty in financial markets. The announcement of U.S. tariffs on other countries around the globe on April 2 intensified trade tensions and raised concerns about a global recession. The result was an unusually high level of activity on Canadian equity markets throughout April. Financial investment services, funds and other financial vehicles contributed the most to the growth in the sector, rising by 3.5 per cent.
  • Public sector activity rose due to the federal election. The public administration sector contributed the most to the increase in services. Federal government administration, in particular, rose 2.2 per cent in April, its first increase in nine months.
  • The success of Canadian hockey teams help lift the arts, entertainment, and recreation sector in April. The sector increased 2.8 per cent in April. For the first time since 2017, five Canadian National Hockey League teams made the playoffs, leading to higher-than-usual attendance at arenas in April and boosting activity in spectator sports during the month.

Insights

With the release of April’s GDP by industry data, Canada enters the second quarter with a slight decrease of 0.1 per cent. Up to this point in 2025 Canada’s economy has been resilient in the face of uncertainty. While exports of goods drove growth in the first quarter of 2025, other indicators have held up relatively well. Retail spending rose again in April by 0.3 per cent, and the labour market has been steadier than expected, adding a modest job 8,800 jobs in May. However, sectors directly impacted by tariffs such as manufacturing and transportation and warehousing shed jobs. Inflation also continues to moderate with the Bank of Canada’s preferred inflation measures inching back toward target in May.

While the first quarter has held up relatively well, there are many headwinds facing the economy. Household spending slowed in the first quarter compared to the last quarter of 2024. And in March, consumer confidence fell to its lowest level ever, while business confidence fell to its lowest point since the start of the pandemic. Advanced estimates show that retail spending likely declined May by 1.1 per cent. Exports will also not be able to keep up the growth seen in the early months of the year, as tariffs on some sectors begin to be felt in the second quarter and U.S. companies frontloading international purchases becomes history. In addition to tariffs, other concerns are arising, such as wildfires and geopolitical tensions overseas. Advanced estimates for GDP by industry also show a potential decline of 0.1 per cent in May. With a trade deal still out of sight between Canada and U.S., the remainder of the year will continue to be challenging for many consumers and businesses.

All eyes will be on reducing internal barriers in Canada. Just yesterday, parliament passed the Bill C-5 One Canadian Economy Act. This will allow the government to move quickly on “nation-building” projects that can deliver an economic boost to Canada. A similar bill has also been passed in Ontario. Policy makers are hoping the impacts will be sooner rather than later, as the act aims to reduce red tape and emphasize speed, while increasing interprovincial trade. What is clear is that all levels of government will need to make bold and strategic decisions to navigate economic headwinds and lay the groundwork for stronger economic growth.

To learn more about Canada’s economic outlooks for the long-term or the next five year’s, please visit The Conference Board of Canada’s Canadian Outlook.

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