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Economic Viewpoint

Desjardins Provincial Outlook: A Weaker National Outlook Masks a Divided Economy

June 8, 2026
Laura Gu
Senior Economist

Highlights

  • The escalation of the Iran conflict has led us to revise our baseline toward a more prolonged disruption in global oil markets. The overall impact on Canada is expected to be modestly positive at the national level, in line with estimates from the Bank of Canada, supported by federal transfers and tax relief measures. However, these policies will not fully offset regional disparities. Elevated oil prices support activity in energy-producing regions through higher incomes and stronger investment as producers expand output. By contrast, oil‑importing provinces face a growth headwind as higher energy costs raise production costs and erode real household purchasing power.
  • Manufacturing‑focused regions face a dual shock: US tariffs on metal products weaken external demand, while higher oil prices raise transportation and production costs. The impact is especially pronounced in central Canada given its reliance on manufacturing and transport‑intensive industries. The Q1 2026 data release also points to greater‑than‑expected weakness, prompting a downward revision to the headline growth outlook. Compared with our February provincial outlook, growth prospects have weakened in central Canada, while energy‑producing provinces remain broadly stable (graph 1).
  • Growth in oil-producing provinces should get a lift from higher oil prices, though the upside remains constrained by near-full pipeline capacity and slow-moving expansions. While investment is expected to rise, the industry’s focus on financial discipline and efficiency points to a more restrained response than in past cycles.
  • The latest expansion of metal‑related tariffs External link. has broadened the range of affected manufactured goods, with Quebec, Ontario and Manitoba most exposed. As a result, effective tariff rates have risen across the country, but most notably in central Canada. Increased exports to non‑US markets have also provided some offset, though broader diversification beyond metals, mining and energy remains limited.
  • Inflation pressures have been revised higher, driven mainly by energy. Atlantic Canada is disproportionately affected due to its greater exposure. While food prices are also rising, the impact is more modest and broadly shared across provinces.
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.