Canada's economy is growing per person – but the provincial split is wide
Canada’s economy has absorbed a series of blows in 2026. But it has not broken. The Bank of Canada rate outlook for 2026 is unlikely to change as a result, according to new analysis from RBC Economics published on June 15, 2026.
The quarterly outlook, produced by a five-person RBC Economics team including Chief Economist Frances Donald, argues that headline gross domestic product (GDP) figures are masking a more encouraging picture. After two consecutive quarters of negative GDP growth — Q4 2025 and Q1 2026 — recession talk has intensified. RBC says that framing misses something important.
On a per-person basis, the economy is still expanding. Per RBC, slowing population growth is pushing aggregate GDP lower, while measures that reflect how households experience the economy are showing signs of improvement.
The unemployment rate edged down to 6.6 per cent in May 2026, from 6.8 per cent at the end of 2025. That is still elevated, particularly for younger workers. But the direction is positive once the dramatic slowdown in population growth is factored in.
Bank of Canada rate outlook 2026: what’s weighing on the economy
Several headwinds are real and ongoing, according to RBC.
- Oil prices: Fuel purchases now account for about 3.5 per cent of household incomes, up from 2.9 per cent in Q4 2025. Lower-income households are feeling this most
- US tariffs: Manufacturing production remains 3.5 per cent below 2024 levels, with steel and wood products hit hardest
- Population decline: Immigration pullbacks have shrunk the labour force, limiting headline GDP while improving per-worker indicators
Despite this, RBC notes that consumer spending has broadly held up. Mortgage professionals tracking client borrowing capacity will want to monitor whether that resilience continues — oil price volatility linked to the Iran conflict remains a key wildcard.
No hikes expected this year, based on BoC rate outlook 2026
RBC does not expect the Bank of Canada (BoC) to hike rates in response to the oil price shock in 2026.
Core inflation has moved lower. The large price surges in jet fuel and fertilizer that followed the closure of the Strait of Hormuz have also largely unwound, reducing pressure on the BoC to act.
The bank’s call: a gradual pivot to rate hikes is not expected until 2027, and only if the economic recovery strengthens materially. For Canadian mortgage brokers, that means variable rates are likely to stay where they are through the rest of 2026.
Provincial outlook: a divided picture
Growth across provinces is far from uniform. RBC’s 2026 Canadian economic outlook shows a clear split between energy-rich provinces and those more exposed to US tariffs.
| Province | 2026 GDP forecast | Key driver |
|---|---|---|
| Newfoundland & Labrador | 4.0% | Oil production + mining |
| Alberta | 2.0% | Energy prices, TMX pipeline |
| Saskatchewan | 1.8% | Mining, China canola tariff relief |
| PEI | 1.7% | Agri-food recovery |
| New Brunswick | 1.4% | Construction, manufacturing |
| Nova Scotia | 1.3% | Government spending |
| Manitoba | 0.8% | Government investment offset |
| British Columbia | 0.6% | Demographic outflows, lumber tariffs |
| Ontario | 0.4% | Trade exposure, auto sector drag |
| Quebec | 0.4% | Tariff drag, job losses |
Source: RBC Economics, Q2 2026 Quarterly Canadian Outlook
Ontario’s delinquency rates on mortgage and non-mortgage loans have reached the highest levels in the country. Quebec shed 87,000 jobs in the first four months of 2026. Both provinces face population declines compounding the economic drag.
What the GDP divide means for housing
The Canadian Real Estate Association (CREA) reported that the national MLS Home Price Index (HPI) composite was down 4.2 per cent year-over-year in April 2026. Prices fell in the three provinces RBC ranks at the bottom of its growth table: BC, Alberta, and Ontario.
Ontario tells the sharpest story. The province’s benchmark price sat at $752,400 in April, down 5.7 per cent from April 2025. Year-to-date home sales were down 4.7 per cent through the first four months of the year.
At the other end, Alberta and Saskatchewan — where RBC projects the strongest growth outside Newfoundland — remained in seller’s market territory through April, with the tightest months-of-supply readings in the country.
For mortgage brokers, that divergence has direct client implications:
- Clients in Ontario and BC face softer collateral values and may need updated appraisals on refinances
- Clients in Alberta and Saskatchewan face tighter inventory and less negotiating room on purchases
- Variable-rate clients in slow-growth provinces face a dual headwind: softer home equity and no near-term rate relief
What this means for mortgage professionals
RBC describes itself as cautiously optimistic that per-person and per-worker indicators will continue to improve through 2026, with further tailwinds building into 2027.
But that optimism comes with conditions. Trade policy must not worsen. Oil prices need to stabilize. And the uneven provincial picture means the Canadian housing and mortgage market outlook varies sharply by region.
The Bank of Canada rate outlook for 2026 points to a prolonged hold — earlier RBC analysis signalled that per-capita conditions were already improving heading into this year. This quarterly report reinforces that view, while making clear the recovery is uneven and province-dependent.
For more on Canada's mortgage market, visit our industry trends and market updates section.
