February growth data landed after the rate call, but it still shapes expectations
The Bank of Canada’s April rate decision came and went with no move, but the numbers that arrived the very next day complicates the picture for anyone betting on quick cuts.
Fresh GDP data for February pointed to an economy that still grew modestly, strengthening the case for a prolonged hold even as borrowers feel the strain of higher rates.
Growth is not roaring, but it is firm enough to keep policymakers focused on inflation risks rather than offering early relief to indebted households and commercial borrowers.
Modest growth, broad-based support
“Real GDP rose 0.2% in February, matching Statistics Canada’s advance estimate and aligning with our pre‑release expectations,” said Abbey Xu, economist at RBC.
“With advance indicators for March pointing to flat activity, Q1 performance is tracking at roughly a 1.7% annualized quarter‑over‑quarter rate.”
Both goods‑producing industries and services contributed to the gain as earlier drags faded.
“Manufacturing rebounded as the key driver within goods production, recovering from shutdowns at several major Ontario auto plants in January due to model changeovers,” she said.
“Wholesale trade posted a notable rebound, partially reversing the prior month’s weakness tied to auto production disruptions.”
“Retail GDP climbed 0.2%, marking a second consecutive monthly gain and underscoring continued consumer spending resilience early in the year,” Xu said. She added that internal cardholder data showed spending remained resilient in March despite higher gas prices.
The message, delivered in governor Tiff Macklem’s latest opening statement, pointed to a central bank that has moved past the height of its tightening cycle but is not ready to rule out further action in either direction as risks evolve. https://t.co/aPdjFg1KOv
— Canadian Mortgage Professional Magazine (@CMPmagazine) April 29, 2026
Pockets of weakness and temporary shocks
Xu said weak spots in February were concentrated in construction, the public sector and entertainment, where the NHL’s Olympic break weighed on activity.
Housing‑related sectors “remained a drag on expansion, consistent with ongoing declines in home resales, though the pace of deterioration eased from prior months,” she said.
Non‑conventional oil and gas extraction fell 1.7% in February, while conventional extraction and mining continued to expand.
Statistics Canada’s early read for March suggested real GDP was “essentially unchanged,” with further gains in wholesale and transportation offset by softness in retail and energy.
What it means for the next rate move
On a quarterly basis, activity remains consistent with a moderate expansion. “Q1 GDP [was] tracking slightly higher than our own forecast of 1.3% annualized GDP growth, as well as the Bank of Canada’s 1.5% projection in its April Monetary Policy Report,” Xu said.
“With population growth slowing, per‑capita improvement is expected to continue.”
“For the Bank of Canada, our base case remains unchanged,” Xu said.
“We expect the BoC to hold rates steady for the remainder of 2026, although the central bank signaled at its April meeting that it will be keeping a close eye on the evolution of underlying inflation measures and broader economic growth implications from higher energy costs due to the ongoing conflict in the Middle East.”
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