{"id":2977,"date":"2025-04-30T18:00:15","date_gmt":"2025-04-30T18:00:15","guid":{"rendered":"https:\/\/www.rbc.com\/en\/economics\/2025\/04\/30\/canadian-economy-softened-ahead-of-tariffs\/"},"modified":"2026-03-31T18:28:08","modified_gmt":"2026-03-31T18:28:08","slug":"canadian-economy-softened-ahead-of-tariffs","status":"publish","type":"post","link":"https:\/\/www.rbc.com\/en\/economics\/canadian-analysis\/data-flashes\/canadian-economy-softened-ahead-of-tariffs\/","title":{"rendered":"Canadian economy softened ahead of tariffs"},"content":{"rendered":"\n<section class=\"wp-block-rbc-section-block  pos-rel\" style=\"border-radius:0px\">\n<div class=\"wp-block-rbc-section-inner-block  section-inner pad-b-hlf mob-pad-b-hlf\" style=\"border-radius:0x\">\n<h3 class=\"wp-block-heading\" id=\"h-the-bottom-line\">The Bottom Line:<\/h3>\n\n\n\n<p>The marginal 0.2% decline in February real Canadian GDP was a reflection of a combination of factors including volatility in mining and oil and gas extraction industry, bad weather, end of government GST holidays and softer consumer and business sentiment due to escalating trade uncertainty.<\/p>\n\n\n\n<p>March\u2019s prelim estimate showed a partial rebound of 0.1%. That would leave activities overall up (an annualized) 1.5% in Q1 which is slightly below our and Bank of Canada\u2019s tracking of 1.8%. The increase in March won\u2019t retrace all of the decline in February, but was still better than feared given tariffs and counter tariffs levied at the beginning and in the middle of that month.<\/p>\n\n\n\n<p>Indeed, softening in the economy since January due to tariffs is not to be discounted, but the GDP data and our own tracking of RBC card spending are both suggesting some resilience remain.<\/p>\n\n\n\n<p>Looking forward, we expect direct tariff impact will be relatively contained but a weaker US economy will continue to spill over and negatively impact Canada. Growth in GDP is expected to halt in the coming quarters while the unemployment rate edges higher into the second half of this year.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-the-details-february-canadian-gdp-recap\">The Details (February Canadian GDP recap):<\/h3>\n\n\n\n<ul class=\"wp-block-rbc-list is-style-black-disc mar-l-hlf mob-mar-l-hlf\">\n<li class=\"wp-block-rbc-list-item\">\n<p>Most of the 0.2% decline in February GDP was led by a 2.5% drop in (the often volatile) mining component, including a 2.8% drop in oil and gas extraction and a 2.6% drop in other mining output (coal mining down almost 15% and metal ore mining down 2.5%.)<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p>But weakness likely also reflected the impact of a sharp pullback in consumer and business confidence as U.S. tariff threats escalated. A sharp pullback in home resale activities pushed residential building construction and real estate and leasing lower.<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p>Retail trade fell by 0.2% and accommodation and food services by 1%. Bad weather and the end of the GST tax holiday mid-month were likely both additional factors behind those declines.<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p>Offsetting strength came from manufacturing. Output was up 0.6% driven by durable goods manufacturing. Part of the increase could be tied to surging goods imports in the U.S. as businesses seek to front-run incoming tariffs, and therefore can\u2019t be relied on for future growth.<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p>Elsewhere, activities in transportation and warehousing (-1.1%) were weighed down by severe snowstorm and rail strikes in February. Increased financial market activities continued to contribute to rising activities in financial investment services (+2.7%)<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p>March\u2019s preliminary estimate of a 0.1% increase in real GDP includes partial reversals in the weaker spots in February. Still, that would leave nearly all of the growth in the economy in Q1 to January.<\/p>\n<\/li>\n<\/ul>\n\n\n\n<hr class=\"wp-block-separator has-text-color has-light-grey-color has-alpha-channel-opacity has-light-grey-background-color has-background is-style-wide wide\" \/>\n\n\n\n<div id=\"everviz-o380I4NP3\" class=\"everviz-o380I4NP3\" data-view=\"graph\"><\/div>\n\n\n\n<hr class=\"wp-block-separator has-text-color has-light-grey-color has-alpha-channel-opacity has-light-grey-background-color has-background is-style-wide wide\" \/>\n\n\n\n<div id=\"everviz-table-lu-TtTxRM\" class=\"everviz-table-lu-TtTxRM\" data-view=\"table\"><\/div>\n\n\n\n<hr class=\"wp-block-separator has-text-color has-light-grey-color has-alpha-channel-opacity has-light-grey-background-color has-background is-style-wide wide\" \/>\n<\/div>\n<\/section>\n","protected":false},"excerpt":{"rendered":"","protected":false},"author":79,"featured_media":2958,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"advgb_blocks_editor_width":"","advgb_blocks_columns_visual_guide":"","footnotes":""},"categories":[83,93],"tags":[115,103,109],"rbc_econ_content_type":[],"class_list":["post-2977","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-canadian-analysis","category-data-flashes","tag-canada","tag-gdp","tag-tariffs"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v27.4 (Yoast SEO v27.4) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Canadian economy softened ahead of tariffs - RBC Economics<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" 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