Canada’s economy grew by 2.2% in the first quarter of 2025, surpassing expectations and matching the growth rate of Q4 2024. Real GDP rose 0.5% each quarter, while per capita GDP climbed to 0.4%, up 0.4% in the previous quarter at a rate of 0.1%.
The agency said quarterly earnings were largely driven by total export growth (+1.6%) and the accumulation of non-agricultural stocks in operations. Despite the ongoing tariff-related uncertainty, Canadian companies have seen a 4.0% increase in business investment every year.
The rise in part was down by 2.8%, due to a 18.6% drop in ownership transfer costs, which is an indicator of resale market activity. It marks the steepest decline since Q1 2022.
The ultimate domestic demand (which captures total consumption and investment in fixed capital) was flat in the first quarter, with no quarterly growth for the first time since the end of 2023.
Pre-data from STATCan shows that Real GDP grew by another 0.1% in April, supported by growth in mining and finance, although partially offset by continued weakness in manufacturing.
“The Canadian economy has looked good to keep up in the opening months of the trade war, and even the latest (estimated) in April shows that growth is weathering the trade storm,” wrote Douglas Porter of BMO.
Economists Warren Cute and Noah Black and National Bank highlight the nameless driver of GDP power: Social Security. While the federal government has a deficit of $62 billion (equivalent to 2% of GDP) in the past four quarters, Canada’s Public Pension Plan (CPP/QPP) delivered a seasonally adjusted surplus (national account base) for the 103rd consecutive quarter,” wrote the adorable and black man.
They describe this surplus as Canada’s “financial lynchpin” which helps offset the total debt of government departments and strengthen financial reserves. According to their estimates, Canada now holds general government financial assets, equivalent to 100% of GDP, which is largely a consistent donation for Social Security.
Strengthening growth makes the prospect of lower BOC
Canada’s latest monthly GDP figures also enhance the basic resilience of the economy, despite tariff uncertainty.
Real GDP rose 0.1% in March, due to 2.2% increase in mining, quarrying and oil and gas extraction. As expected, manufacturing fell 0.4% in the month and 0.7% year-on-year.
Faced with external headwinds, quarterly and monthly results together show that the economy is stronger than expected. Although the composition of Q1 growth is not particularly strong, “in general, the Canadian economy seems to be better than we had expected before,” they added, which gives Canadian banks more time to evaluate incoming data and support temporary shelving rates.
Financial markets have barely reduced the price of tax rates at next week’s meeting. As a result, today’s uptrend surprises only had a messy market impact, with the Canadian dollar raising ticking and bond yields largely stabilized at 2.82%.
Still, some economists are revising their forecasts.
“While we can certainly question around the details, the Canadian Bank will certainly capture the results of the headlines and the decent gains in April,” Porter said. “With this solid set of results, we formally abandoned our call for a lower tax rate next week and are now looking for the next tax rate pruning in the late July decision for eight weeks.”
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Last modified: May 30, 2025
