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Canadian Outlook
It’s been a tough go for Canada so far in 2025. Amid a sizeable trade shock and lingering uncertainty, the economy’s growth outlook is running far softer than most forecasters predicted a year ago.
The unemployment rate continues to rise, consumer confidence plummeted in the spring and hesitancy around business investment remains. Housing markets have been wobbling in several parts of the country despite aggressive interest rate cuts from the Bank of Canada.
Meanwhile, well-recognized structural challenges persist. Lackluster business investment further threatens decades-long underperformance in productivity—Canada’s economic scarlet letter. And, to add salt to the wound, lower immigration rates mean population growth will no longer provide the same tailwinds it did in recent years.
It’s easy to see the downside risks and, rightfully, they have taken over the Canadian economic narrative for months. And a 90-day pause on more extreme U.S. reciprocal tariffs dating back to April is set to end in early July.
But, while Canada’s economic path forward remains challenging, it appears considerably less treacherous than it did just a few months ago—a narrative that has yet to permeate the Canadian psyche.
Indeed, compared to the gloomy outlook over the past month, there are some upsides to the economy worth highlighting. There’s a combination of now manageable trade impacts, flexibility in monetary policy, fiscal capacity, and strategic resource advantages.
With this in mind, we highlight five recent developments have been more positive than many had anticipated.
1. Most Canadian exports have been exempted from increased U.S. tariffs
Canada has swung from being firmly in the focus of U.S. trade ire in February and March to having the lowest U.S. tariff rate of any major trading partner in April.
Tariffs on specific products, including steel and aluminum and the non-U.S. content of finished motor vehicles, remain subject to significant U.S. tariffs. But a broader exemption for U.S. imports from Canada to remain duty free under the CUSMA free trade deal since early March appears to be an effective shield against tariffs for most Canadian exports.
By our count, 86% of Canadian exports to the U.S. last year would still be duty free under current rules. The U.S. Census Bureau in April reported almost 90% of U.S. imports from Canada remained duty free in April and the average effective tariff on U.S. imports from Canada was 2.3%—up significantly from essentially zero in January—but the lowest of any major U.S. trade partner.
2. ‘Hard’ spending numbers have held up better than ‘soft’ confidence measures
Consumer sentiment surveys in Canada—sometimes called “soft” economic data because they track how households are feeling more than how they’re actually spending—cratered to record lows in March as U.S. trade tensions ratcheted up. If that was the only indicator we had, it would clearly suggest the economy was in recession then.
But actual spending data has not matched that scale of weakness. To be sure, not all economic data has been strong—employment has weakened in trade-exposed sectors like manufacturing and transportation. But, broader consumer spending has remained relatively resilient. The unemployment rate has edged higher, but job postings on Indeed.com have shown signs of stabilization in May.
3. BoC has room to cut rates further if needed
The BoC began lowering interest rates well ahead of many global peers with significant 225 basis points of monetary policy easing already in the pipeline. This will likely to grow in impact as the lagged effects of rate cuts work their way through the economy.
We think the central bank is now at the end of its cutting cycle and do not expect further reductions. But, that is contingent on the economic growth backdrop and labour markets stabilizing. Should the BoC want or need to respond further, it has flexibility in the inflation data to do so.
Yes, the BoC was clearly unnerved recently by firmer-than-expected inflation in April. But, critically, that upward surprise likely had more to do with resilient consumer spending, particularly on non-housing related discretionary services, than with the impact of tariffs.
We also expect limited impact from Canada’s retaliatory import tariffs on inflation, and that means monetary policy will remain flexible to act as a traditional buffer for the economy. The central bank will need to take into account potential additional support that could come from government spending (see below), but, overall, it has the room to cut interest rates further if it needs to.
4. Fiscal capacity and strategic advantages
There are two streams of fiscal support in play in Canada that produce upside risks worth monitoring.
First, as we argued here, Canada maintains meaningful capacity to buffer against economic shocks if required, regardless of the political landscape. Government net debt levels are still relatively low compared to other advanced economies. That is less true compared to the shrinking number of triple-A rated economies, but both provincial and federal governments have signalled willingness to step in and support trade impacted sectors if and as needed.
This fiscal room provides an important backstop for the economy that shouldn’t be underestimated, particularly compared to its global peers (and the U.S.). Moreover, it is a shift from earlier this year when it appeared Canada might need to buffer a trade shock alone. Now, global peers are engaged in fiscal expansion that helps to maintain Canada’s relative fiscal place.
A formal spending plan has yet to be presented by the newly elected federal government, but there has been movement on a range of items that can provide support to 2025-2026 growth. Action on interprovincial trade barriers could pay long-run dividends helping to support investment and productivity growth. Tax deferrals, loan programs, and employment insurance measures have been implemented to help trade-related sectors through shorter-run disruptions. And now announcements related to defence could add significantly to growth in 2026.
Second, the U.S. induced trade shock has turned global attention towards the needs of the global economy in the future, and which countries are best equipped and positioned to support them. Canada’s resources—agriculture, energy, and critical minerals—are increasingly well positioned to support the needs of the global economy, particularly as it seeks to expand AI/data and defence spending. This represents a moment for Canada to invest in itself and fulfill this need, but it may also be the seeds of global partners recognizing the opportunities within Canada.
5. U.S. growth resilience and exceptionalism
Canadian exporters appear to be less targeted with specific U.S. tariffs, but they are still tied to the performance of the U.S. economy, particularly in the heavily trade integrated manufacturing sector.
This was a problem for Canada in the immediate aftermath of Liberation Day on April 2. Broad based global tariffs imposed by the U.S. on all of its trade partners raised the risk of a U.S. recession and, therefore, a Canadian one as well. Now, however, the de-escalation of U.S. tariffs support a slow, but resilient outlook for the U.S, improving Canada’s prospects as well.
Problematically, that U.S. resilience still appears to be mostly coming from the exceptionally large government budget deficit, and household spending on services that have little direct Canadian import content.
In the U.S. industrial sector—where trade ties are much closer—manufacturing employment was down 0.7% year-over-year in May and early data on job openings shows hiring demand continuing to slow as aggressive tariffs on most of the rest of the world push costs higher, and add to uncertainty. Still, we do not expect a U.S. recession this year, and that is good news for Canadian exporters that are still, in most cases, able to access the U.S. market duty free.
Provincial overview
The U.S.’s targeted approach to tariffs on Canadian exports is poised to have varying impacts on provincial economies with manufacturing-heavy ones in central Canada most exposed.
Increased steel and aluminum duties, if sustained, would compound existing pressures—particularly in Ontario where growth is projected to be 1.3% this year, along with Quebec. Manitoba (1.2%) and New Brunswick (1.2%) are similarly expected to trail the national average with trade exposure.
We see more resource-dependent economies maintaining leadership positions with Newfoundland (2,6%), Alberta (2.4%) and Saskatchewan (2.2%) continuing to outpace most other regions supported by operations of key energy infrastructure creating export opportunities beyond traditional U.S. markets.
Export diversification and natural resource strength will partly buffer British Columbia (1.2%) as well, though slumped construction and real estate investment is unlikely to support increased growth this year.
Prince Edward Island (1.7%) and Nova Scotia (1.6%) are on moderating growth trajectories— even though they are still above the national average with stronger public sector investment helping to cushion trade tensions and slowing population growth.
Real GDP growth
Source: Statistics Canada, RBC Economics
BRITISH COLUMBIA – Construction weakness dampens outlook
We expect British Columbia’s economic expansion to remain relatively stable from 2024. Slumping real estate activity and construction investment are key concerns, along with the impact of trade tensions—prompting a slight tamp down of our 2025 growth forecast, to 1.2% from 1.5%.
Exports started 2025 strong with a temporary surge in January ahead of anticipated U.S. tariffs. However, they’ve slid drastically since as demand south of the border cooled in the face of the U.S. administration moving ahead with more protectionist trade policy. The nearly operational liquid natural gas export facility at Kitimat—strategically positioned to expand exports to Asia—may help counterbalance unfavorable trade developments.
Retail sales have bounced back as well, increasing 6.1% year-over-year in Q1 (seasonally adjusted). Our tracking of RBC cardholder spending points to sustained strength in April and May as recent rate cuts unleash pent-up demand. Per capita expenditures have now reversed course and outpace most other provinces—marking a turnaround from what had been one of the steepest spending declines nationally.
Wages are continuing to rise despite the rising unemployment rate—which we expect is nearing a cyclical peak. Job losses have been concentrated in trade-reliant natural resource industries shaken by changing trade policies. However, operation of the nearly completed LNG export terminal at Kitimat and tariff exemption through CUSMA poses upside for the industry. Solid wage growth, along with a rebound in domestic tourism, should maintain consumer spending momentum ahead.
But, increased spending isn’t translating to larger investments—like housing. Trade uncertainty has derailed the housing market recovery, pushing resales down 12% year-over-year—more than reversing gains made in the fall.
Sluggish housing activity has contributed to challenges for construction. Housing starts are down 21% this year as slumped prices and high construction costs take a toll on homebuilding. Non-residential construction isn’t making up for the slow activity. The wrap up of major construction projects means a large chunk of investment dollars won’t be renewed in coming quarters. Trade uncertainty has prevented more investment from popping up on the horizon as well, with capital expenditure intentions sitting relatively flat from a year ago (0.7%).
ALBERTA – Riding on domestic strength and new markets
Alberta’s economy entered 2025 with solid momentum, having grown by 2.7% in 2024 with a strong pace sustained in the latter part of the year.
Strength in health care, construction, and oil and gas extraction provided a strong foundation, and while Alberta’s momentum is expected to slow slightly, we continue to expect that it will be among top provincial performers this year, with real GDP forecast to expand by 2.4% in 2025. However, mounting challenges could test its resilience in the second half.
Despite emerging U.S. trade tensions, Alberta’s energy-heavy exports have been largely shielded from significant impact. Energy products, accounting for 82% of exports to the U.S., should be largely CUSMA-compliant and face limited or no tariff exposure. That said, global oil prices have come under pressure in recent months and could weigh on profitability and investment. While the West Texas Intermediate-Western Canadian Select spread remains narrower than pre-Trans Mountain Expansion Project (TMX) levels, lower prices are expected to dampen revenues-including into government coffers-in 2025. For consumers, however, this decline, paired with the removal of the federal consumer carbon tax, provides a modest tailwind to purchasing power.
The TMX pipeline is proving to be a critical outlet for crude with shipments ramping up in early spring. Exports to Asia have also gained momentum, supporting diversification beyond the U.S. Drilling remained strong through the spring with active rigs up 8.1% year-over-year in May. Oil production continues at record levels, though wildfires this spring has led some producers to temporarily curtail production, posing near-term risks to output.
Some slack has started to build in the labour market. Job gains have not kept pace with labour force growth, resulting in a 0.7% rise in the unemployment rate this year, hitting 7.4% in May. Population growth is easing from last year’s exceptionally high rates, but remains elevated at 3.9% year-over-year. With continued strong—albeit moderating—population inflows, we expect further upward pressure on the unemployment rate, possibly averaging 7.2% in 2025.
The housing market is shifting to more balance from significant tightness. Between January and April, home resales fell 6.8% year-over-year, but residential construction remains robust—housing starts have risen 24% over the same period. We expect still-strong demographics to sustain underlying demand and exert moderate upward pressure on home prices, even as new supply enters the market.
Against this backdrop, downside risks are mounting. Ongoing trade policy uncertainty and declining oil prices may dampen business investment. The recent announcement by Dow to delay construction of a $11.6 billion net-zero petrochemical facility underscores the potential for hesitation among major investors.
SASKATCHEWAN – Steady through the storm
Saskatchewan’s economy grew by a surprisingly robust 3.4% in 2024, driven by strong potash and other ore mineral production as well as vigorous construction.
While growth is expected to moderate, it is on track for another solid year in 2025 with real GDP forecast to expand by 2.2%, slightly higher than our previous 1.9% forecast. Momentum in resources and construction remains strong, supported by a diversified export base and comparatively lower exposure to U.S. tariffs.
The labour market remains one of the healthiest in the country. Continued demand for workers in construction and resource industries has driven the unemployment rate down to 4.2% in May, the lowest in Canada. This tight labour backdrop is expected to continue supporting household spending and retail sales in 2025.
Saskatchewan’s affordability advantage and tight labour market have been positive drivers for residential construction. Housing starts are up a significant 83% through April, compared to the same period last year. Benchmark home prices have continued to edge higher, supported by still-solid demand.
The export outlook remains comparatively well-positioned despite ongoing U.S. trade tensions. Saskatchewan’s key exports—energy products such as oil and uranium, along with potash and canola—should be largely CUSMA-compliant. Its comparatively lower exposure to the U.S. market also bodes well. Similarly, tariffs imposed by China on some agricultural products are expected to affect only a relatively small share of its exports—roughly 1.5%.
Potash prices remain elevated, and a renewed push for nuclear energy development in the U.S. could further benefit the uranium industry over the longer term. The U.S. imports roughly a quarter of its uranium from Canada, all of which is sourced from Saskatchewan. Uranium production reached a record high 167, 000 tonnes in 2024—up 28% from 2023. Uranium production is up 2.7% this year from Q1 last year, suggesting modest early gains tied to rising demand.
Agricultural conditions are more mixed. Seeding progress (97% complete) is marginally higher than historical averages, but risks of intensifying wildfires remain high, particularly in central regions impacted by hot and dry El Niño conditions. Current crop development is broadly in line with seasonal norms, but we remain cautious about yield prospects this summer.
Meanwhile, capital spending intentions were strong at the start of 2025. Construction at major projects like the Jansen Potash Mine continues to provide a lift to both employment and the overall economy. Production is scheduled to begin next year, and will remain a key driver of the economy in 2025.
MANITOBA – External pressures to weigh on growth
Manitoba’s economy expanded modestly by 1.1% in 2024, and we expect growth will continue to remain below the national average in 2025—now projected at 1.2%—down slightly from our earlier forecast of 1.4%.
The province faces significant headwinds including trade uncertainty tied to U.S. tariffs, and the potential for climate-related disruptions. Spring wildfires—already surpassing typical seasonal counts—threaten key sectors, notably agriculture and utilities, where drought conditions could hamper production and electricity generation.
Trade turbulence remains a key vulnerability. U.S. tariffs pose challenges to its significant transportation and manufacturing sectors which are closely linked to central Canadian supply chains. Manitoba exports over half of its products to other provinces-a higher share than any other province-making it particularly sensitive to domestic slowdowns. With Ontario, a key trading partner, facing significant disruptions from the tariffs, the province’s interprovincial trade outlook has dimmed.
Agriculture faces growing uncertainty as the wildfire season intensifies. About 116 fires have been reported so far—well above the seasonal average—as risks to crop production mount. Seeding has progressed well, but persistent dry weather could act as a drag on crop yields heading into the summer.
Still, there are key sources of resilience. Manitoba is set to benefit from its largest-ever capital investment plan from the provincial government with $3.7 billion earmarked for infrastructure in fiscal 2025–26. This is part of a broader $16.7 billion five-year plan focused on expanding schools, hospitals, and other public infrastructure. These investments are expected to drive construction and support job growth this year.
The budget also introduced measures aimed at shoring up household and business confidence amid rising external uncertainty. This includes monetary support for industries affected by tariffs, a cut to the Health and Post-Secondary Education Tax Levy, and a $100 increase to the Homeowners Affordability Tax Credit. These fiscal supports should offer some relief to consumers and employers this year.
Meanwhile, the housing market has been supported by the province’s relative affordability advantage and strong population growth. Between January and April, home resales rose 8.2% year-over-year, and we expect this positive momentum to support modest home price growth this year.
ONTARIO – Trade uncertainty keeps growth subdued
Ontario faces stiff headwinds with trade actions disproportionately impacting its economy. Newly increased steel and aluminum tariffs are straining cross border commerce along with uncertainty, triggering job losses.
Following a stronger than anticipated Q1, we could see a short-term contraction mid-year. The correction after Q1’s strong performance—due, in part, to stockpiling ahead of looming U.S. tariffs—should neutralize subsequent weakness. As a result, we’re leaving our growth forecast largely unchanged from the prior estimate. At 1.3%, we see Ontario’s real GDP expansion staying behind the national average in 2025.
The auto industry—historically a prime engine of its manufacturing sector—is showing signs of disruption. A one-week shutdown at Stellantis’ Windsor plant in May and scheduled production pauses at General Motors factories until the fall highlight vulnerabilities. Perhaps, more concerning was the postponement of Honda’s $15 billion EV project, which came despite new exemptions for autos and parts complying with CUSMA (covering about 90% of the sector).
Any optimism from more favourable trade rules for autos, however, was quickly squashed by increased U.S. tariffs on steel and aluminum (up to 50% from 25%). Shifting trade policy continues to influence business activity on both sides of the border. Businesses initially stockpiled goods in the first few weeks of 2025 ahead of looming tariffs. But as expected, Ontario exports have weakened notably amid rising U.S. import costs. The current trade policy environment, characterized by frequent and unpredictable changes presents a concerning outlook for manufacturing exports.
We’ve seen clearer signs of job losses as a result of slower business activity as well. April saw the largest one-month drop in manufacturing employment since the pandemic with nearly 33,000 fewer employed (seasonally adjusted) in the industry. Weaker employment trends—particularly in manufacturing and construction—have contributed to a notable acceleration in the unemployment rate, which is set to peak at 8% this quarter.
Household indicators also point to some signs of fragility. Home resales have retreated significantly in recent months, driving property values down. Loan delinquencies are on the rise as increased job losses corner some mortgage and other debt holders. The share of residential mortgages in arrears has risen 0.2% in March—a considerable jump from a record low 0.06% recorded three years ago.
QUEBEC – Making way through choppy waters
The trade war has made Quebec’s economic environment more fraught for businesses and households. U.S. tariffs on some top exports (e.g. aluminum and aerospace) are raising significant concerns for directly impacted industries and communities.
But, resilience in key sectors—including residential construction and consumer spending—lead us to believe the overall economy is on track to sustain last year’s growth of 1.3%.
It will take several more months to fully assess the trade war’s impact on industries. The sanguine picture early this year was likely heavily distorted by tariff front-running that led to a 15% surge in (nominal) merchandise exports in Q1. A plunge in April and further reversal expected in the coming months suggests a weaker picture will emerge. Similar gyrations in merchandise imports will partly mitigate the hit to net trade.
The domestic side of the economy shows more stability. Homebuilders are maintaining a strong pace so far on the heels of last year’s sharp rebound. Housing starts from January to April (averaging 58,000 units on an annualized basis) were near pre-pandemic peaks. Some 80% of units in large urban areas were purpose-built rentals—addressing supply shortages underlying the housing crisis. A sharp increase in building permits (up 37% year-to-date in March) bodes well for starts staying elevated this year. A rise in existing home sales (up 15% year-to-date in April) is also positive.
Consumers haven’t backed down either. Sales were up 4% year-to-date in April at retail stores and 5.6% stronger at restaurants and bars. Our tracking of RBC cardholder transactions indicates consumer spending growth extended into May. We think Canadians’ boycott of U.S. travel destinations will benefit tourism spending in Quebec. A softening job market—we expect Quebec’s unemployment rate to rise from 5.4% in 2024 to 6% in 2025—and slower population growth, though, will weigh on growth.
Utilities are set to contribute to growth this year following two years of decline. Electricity production jumped a strong 15% over the first three months of 2025 as water reservoir levels recover from earlier drought-induced declines. Quebec generates more than 92% of its electricity from hydraulic turbines.
NEW BRUNSWICK – Slower momentum sets in
New Brunswick’s economy showed greater resilience than we expected in 2024 with our initial growth estimate of 1.3% now looking too conservative.
Stronger-than-anticipated agricultural production and construction activity suggest real gross domestic product came closer to 2% last year. Momentum in homebuilding during the second half of 2024 carried into early 2025, prompting us to revise our 2025 growth forecast slightly upward to 1.2% from 1%.
But, 2025 still represents a significant deceleration from recent performance. Substantial dependence on U.S. demand coupled with decelerating population growth has already begun constraining economic activity—trends we expect to continue this year.
New Brunswick remains Canada’s most exposed province to ongoing U.S. trade tensions with 90% of exports heading south. The majority of exports to the U.S. are energy—currently exempt from U.S. tariffs under CUSMA. Still, tariff threats continue to rock business confidence.
Simultaneously, ongoing Chinese trade disputes continue to harm the fishing industry with 25% tariffs on seafood products remaining in place as China’s retaliation for Canada’s 100% tariffs on Chinese EVs and 25% on steel and aluminum. Together, these tensions have contributed to a 7.9% drop in shipments from New Brunswick’s largest port in the first 20 weeks of the year.
High levels of government investment will be among the few positives for the outlook this year with the injection of $1.26 billion in capital funds keeping non-residential construction investment on the rise.
NOVA SCOTIA – Growth to moderate after upside surprise in 2024
Nova Scotia’s economy outperformed expectations in 2024 with real GDP growth hitting 2.7%. Strength in construction and manufacturing was stronger than anticipated, helping to lift overall output.
We don’t, however, see that growth rate being sustained in 2025. Population growth has slowed considerably, which will restrain household expenditures. Moderating tailwinds and shifting international trade dynamics are projected to bring Nova Scotia’s economic expansion down to 1.6%—in line with the national average after two consecutive years of stronger relative performance.
Nova Scotia shouldn’t see significant direct impacts from U.S. tariffs. Exports to the U.S. account for just 7% of GDP, with most goods exempt from tariffs under CUSMA. Still, weak exports have weighed on manufacturing. Food manufacturing shipments in Q1 have already declined to the lowest level in over a year, reflecting weaker demand tied in part to Chinese tariffs on Canadian seafood products. With international exports accounting for just 16% of Nova Scotia’s GDP (average between 2021 and 2023)—nearly half the national average of 30%–we see the drag from unfavourable trade developments being relatively contained.
Still, the government has leaned more heavily on fiscal policy to sustain growth. It tabled a $3.5 billion capital spending plan for 2025-26—a 17% increase over the last fiscal year—which came alongside tax cuts for businesses and households.
Trade turbulence won’t be the only challenge this year. Population growth—a major catalyst for consumer spending and housing demand—is rapidly decelerating and on track to slow by roughly half this year after reaching its highest on record of 3% in 2023.
Slowing population growth may already be weighing on the housing market with resales considerably lower than in the fall. Easing supply-demand conditions have forced prices to flatten, inching closer to year ago levels. An ambitious capital plan is expected to support construction activity, but weaker price signals are likely to dampen residential homebuilding activity. As a result, housing starts are projected to hold steady at about 7,400 units—limiting momentum from government capital investment.
PRINCE EDWARD ISLAND – Public sector investment buffers growth headwinds
We maintain our 2025 growth forecast of 1.7% for Prince Edward Island despite stronger-than-expected performance in 2024.
Construction investment was a large contributor last year, with high levels of investment being sustained over the first few months of 2025 due to massive injections of public funding for infrastructure and strong housing starts. Still, trade tensions and slowing population growth are expected to counter some of this strength.
P.E.I. will face challenges from ongoing trade tensions. U.S. tariffs directly target few exports—as a growing share of exports meet CUSMA requirements for exemption—but, it remains vulnerable to Chinese tariffs on seafood products. China is the second largest market for P.E.I. lobsters, which have already seen prices slide. International exports account for nearly a quarter of the economy, meaning slower trade activity could weigh meaningfully on GDP growth in the year ahead if tariffs are maintained.
Trade challenges come at a time when business investment was already softening. Even before the trade conflict erupted, Statistics Canada’s survey of capital intentions (CAPEX) pointed to a 1.3% year-over-year decline in private sector capital investment. This largely reflected weaker investment in the agriculture, forestry, fishing and hunting industry after a spike in 2023 due to Hurricane Fiona rebuilding efforts. Reduced fishing quotas and trade frictions could push actual business investment below already modest expectations.
Slower homebuilding will be another challenge. P.E.I. has experienced the most dramatic population growth slowdown of any province with growth falling to 1.7% in Q1 2024 from a record 4% just over a year earlier. We see this trend continuing as the federal government implements stricter immigration targets.
Shifting demographic trends could have already blunted retail spending as well with growth now trailing all provinces at 1.7% this year. It is likely to remain in this position this year. Our cardholder spending data points to continued softening through May, reinforcing our view that consumption will provide little boost to growth this year.
A significant 21% increase in government capital expenditures—primarily for new education and healthcare facilities—will be a significant growth driver. But it won’t prevent the rate of growth from nearly halving in 2025.
NEWFOUNDLAND & LABRADOR – Resource production revival fuels growth
We’ve upgraded our 2025 forecast for Newfoundland and Labrador to 2.6% from 1.7%—driven primarily by a resurgence in natural resource production—a sector that accounts for one-third of GDP.
Moderating population growth and weakening construction will provide some offset, while trade tensions pose downside risks.
The oil industry is off to a strong start this year with production already up 13%. This surge reflects both the SeaRose FPSO’s resumption of operations at the White Rose field in March and the recent return of the Terra Nova vessel to service. Most of the crude oil is exported to the U.S. for refining, but current trade policy exempts it from tariffs. Trade diversification has also enabled a shift in export destinations in recent months as uncertainty depressed energy exports to the U.S. Production has since been redirected to northern Europe—particularly the Netherlands and Germany.
Mining shipments are similarly slated for substantial growth. Massive boosts to nickel and gold production are expected as the Valentine and Hammerdown mines begin production this year. Recent completion of the Voisey Bay mine expansion will increase nickel production as well with capacity ramping up to 45,000 tonnes per year (up 22%).
The employment landscape remains robust—reaching an all-time high in May—with nearly 250,000 workers. Strong gains have helped keep the unemployment rate near historically lows, dipping below 10% recently.
The tourism sector offers growth potential as well. Diminishing interest in U.S. travel has Canadians choosing domestic destinations. The restoration of direct flights to Europe since 2019 could attract more international travellers, complementing domestic demand.
The brighter outlook, however, doesn’t come without challenges. The transition of major mining projects from construction to operation will be a drag on investment and comes when few new projects are in the pipeline amid trade uncertainties. Residential construction will offer little counterbalance to the broader construction investment downturn with homebuilding slowing in response to moderating population growth.
Detailed forecast tables:
About the Authors
Frances Donald is the Chief Economist at RBC and oversees a team of leading professionals, who deliver economic analyses and insights to inform RBC clients around the globe. Frances is a key expert on economic issues and is highly sought after by clients, government leaders, policy makers, and media in the U.S. and Canada.
Robert Hogue is an Assistant Chief Economist, responsible for providing analysis and forecasts on the Canadian housing market and provincial economies.
Nathan Janzen is an Assistant Chief Economist, leading the macroeconomic analysis group. His focus is on analysis and forecasting macroeconomic developments in Canada and the United States.
Rachel Battaglia is an economist at RBC. She is a member of the Macro and Regional Analysis Group, providing analysis for the provincial macroeconomic outlook.
Claire Fan is a senior economist at RBC. She focuses on macroeconomic analysis and is responsible for projecting key indicators including GDP, employment and inflation for Canada and the US.
Abbey Xu is an economist at RBC. She is a member of the macroeconomic analysis group, focusing on macroeconomic forecasting models and providing timely analysis and updates on economic trends.
Salim Zanzana is an economist at RBC. He focuses on emerging macroeconomic issues, ranging from trends in the labour market to shifts in the longer-term structural growth of Canada and other global economies.
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