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Economic News

Canada: Goods‑Led Real GDP Growth Kicks Off a Volatile Year

March 31, 2026
LJ Valencia
Economist

Highlights

  • Canadian real GDP increased by 0.1% m/m in January, following an increase of 0.2% in December. This was above the consensus of economic forecasters and Statistics Canada’s flash estimate (0.0%). Gains were largely driven by goods‑producing industries while services‑producing industries did not change. See Table 1 for further details.
  • Statistics Canada’s flash estimate points to a 0.2% increase in real GDP in February (graph 1), probably due to gains in manufacturing, resource extraction and in finance and insurance offsetting weakness in agriculture, forestry, fishing and hunting.

Comments

The positive real GDP print in January was primarily thanks to higher activity in goods-producing industries, which grew for a second consecutive month (0.2% m/m). Resource extraction led the growth (1.2%), on the back of higher oil and gas extraction. The construction sector expanded for a third month in a row (1.1%), driven by both non‑residential and residential building construction. In contrast, the manufacturing sector contracted (-1.4%) with broad weakness across subsectors. Durable goods manufacturing fell for the third time in four months (-2.0%), driven by losses in transportation equipment (-6.0%) and machinery manufacturing (-5.6%). Motor vehicle and parts manufacturing recorded its largest decline since September 2021 (-10.8%) as seasonal shutdowns extended into January.

The services sector was largely unchanged in the month. Retail trade rose (0.8%), with gains across most subsectors. The finance and insurance sector saw its largest increase since September 2025 (0.5%), mainly supported by record foreign acquisitions of Canadian bonds. On the other hand, wholesale trade contracted for the third time in four months (-1.2%) mostly due to slower activity in motor vehicle and motor vehicle parts and accessories merchant wholesalers. Transportation and warehousing declined (-0.7%) as extreme weather weighed down activity across most subsectors. Lastly, real estate and rental and leasing posted its first decline in 10 months (-0.2%), reflecting weaker national home resale activity External link. in the month.

The higher‑than‑expected January print resulted in an increase to Canada’s real GDP per capita. That said, the trend has been dismal despite recent population declines External link., suggesting that it will take more than a change in immigration policy to restore real GDP per capita (graph 2). 

Implications

Our early tracking suggests real GDP growth of around 1.5% annualized in Q1 2026. This is below to the Bank of Canada’s outlook of 1.8% growth published in the January 2026 Monetary Policy Report External link..

The path ahead appears to be volatile. Our latest outlook External link. points to quickly rising oil prices due to the Iran conflict pushing up growth for 2026. That said, the benefits should be relatively concentrated. Meanwhile, uncertainty around the Canada‑United States‑Mexico Agreement (CUSMA) joint review External link. is a persistent downside risk, with uncertainty adding more costs to Canadian businesses. The Bank held rates steady in its latest announcement External link., acknowledging the presence of economic weakness and the risk of rising inflation. All in all, today’s GDP data is unlikely to move the monetary policy needle.

NOTE TO READERS: The letters k, M and B are used in texts, graphs and tables to refer to thousands, millions and billions respectively. IMPORTANT: This document is based on public information and may under no circumstances be used or construed as a commitment by Desjardins Group. While the information provided has been determined on the basis of data obtained from sources that are deemed to be reliable, Desjardins Group in no way warrants that the information is accurate or complete. The document is provided solely for information purposes and does not constitute an offer or solicitation for purchase or sale. Desjardins Group takes no responsibility for the consequences of any decision whatsoever made on the basis of the data contained herein and does not hereby undertake to provide any advice, notably in the area of investment services. Data on prices and margins is provided for information purposes and may be modified at any time based on such factors as market conditions. The past performances and projections expressed herein are no guarantee of future performance. Unless otherwise indicated, the opinions and forecasts contained herein are those of the document’s authors and do not represent the opinions of any other person or the official position of Desjardins Group.