Canada’s economy grew at an annualized pace of 2.2% in the first quarter of 2025, outpacing expectations and matching the growth rate from Q4 2024. On a quarterly basis, real GDP rose 0.5%, while per capita GDP climbed 0.4%, building on a modest 0.1% gain in the previous quarter.
The quarterly gain was largely driven by growth in total exports (+1.6%) and the buildup of business non-farm inventories, according to the agency. On an annual basis, business investment rose a solid 4.0%, despite ongoing tariff-related uncertainty facing Canadian firms.
The upside was partially offset by a 2.8% drop in residential investment, driven by an 18.6% decline in ownership transfer costs—an indicator of resale market activity. It marked the steepest drop since Q1 2022.
Final domestic demand—which captures total consumption and investment in fixed capital—was flat in Q1, posting no quarterly growth for the first time since late 2023.
Advance data from StatCan suggests that real GDP rose another 0.1% in April, supported by gains in mining and finance, though partly offset by continued weakness in manufacturing.
“The Canadian economy looks to have held up reasonably well in the opening months of the trade war, and even the most recent (estimate) for April suggests growth is weathering the trade storm,” wrote BMO’s Douglas Porter.
Economists Warren Lovely and Noah Black with National Bank highlight an unsung driver of GDP strength: social security. While the federal government posted a $62-billion deficit over the past four quarters—equivalent to 2% of GDP—Canada’s public pension programs (CPP/QPP) “delivered a seasonally adjusted surplus (national accounts basis) for a 103rd straight quarter,” Lovely and Black wrote.
They describe this surplus as a “fiscal lynchpin” for Canada, helping to offset gross debt and bolster financial reserves across government sectors. By their estimate, Canada now holds general government financial assets equivalent to 100% of GDP—thanks in no small part to consistent contributions from social security.
Stronger growth dims prospects for a BoC rate cut
Canada’s latest monthly GDP figures also reinforced the economy’s underlying resilience despite ongoing tariff uncertainty.
Real GDP edged up 0.1% in March, driven by a 2.2% gain in mining, quarrying and oil and gas extraction. Manufacturing, as expected, slipped 0.4% on the month and was down 0.7% year-over-year.
Together, the quarterly and monthly results point to a sturdier-than-expected economy in the face of external headwinds. According to CIBC‘s Andrew Grantham, while the composition of Q1 growth wasn’t particularly strong, “overall it appears that the Canadian economy is faring better than we previously expected.” That, they add, gives the Bank of Canada more time to assess incoming data and supports keeping rates on hold for now.
Financial markets had already priced in little chance of a rate cut at next week’s meeting. As a result, today’s upside surprise had only a muted market impact, with the Canadian dollar ticking higher and the 5-year bond yield largely steady at 2.82%.
Still, some economists are revising their forecasts.
“While we can certainly quibble around the details, the Bank of Canada will surely seize on the headline outcome as well as the decent gain for April,” said Porter. “With this sturdy set of results, we are officially abandoning our call of a rate cut next week, and now look for the next rate trim eight weeks hence at the late-July decision.”
Visited 3,441 times, 276 visit(s) today
Bank of Canada brett Surbey Dashboard economic data economic indicators Editor’s pick gdp gdp growth statcan statcan GDP statistics canada statistics Canada GDP
Last modified: May 30, 2025
