The Canadian gross domestic product report for Q1 is the key release of Friday, at 8:30 a.m. ET, said Bank of Montreal (BMO).
The bank notes that the Canadian economy seemed to regain its footing at the start of the year. BMO expects real GDP to expand 1.5% a.r. in Q1 following a modest contraction in Q4. The bank's call is a touch softer than the flash estimate (+1.7% a.r.).
Swings in trade -- like that in March -- can drive larger-than-normal differences between measures of GDP by industry (the flash estimate) and by expenditure (next week's release), stated BMO. Still, spending by governments and consumers drove Q1's recovery, with the latter hanging in there despite a softer labor market and ongoing economic uncertainty.
Business investment likely pulled back from a rare increase in Q4, while housing activity continues to struggle in some of the largest regions in the country. Net exports look to drag on growth despite the energy shock, offset by an increase in inventories, although the bank predicts the former may support growth in Q2.
In the monthly data, real GDP is expected to grow 0.1% in March, a tenth firmer than the flash estimate, added BMO. Manufacturing and wholesale trade volumes continued to recover from an early-year slump, while hours worked ticked up. On the flip side, weaker retail sales volumes dragged on growth, and Statistics Canada noted that activity declined in mining, quarrying, and oil and natural gas.
Elsewhere, home sales continued to struggle as the spring buying season kicked off.
Overall, momentum looks to have slowed as geopolitical uncertainty ratcheted even higher in March, pointing to a softer hand-off heading into Q2, according to the bank. While the energy price spike will benefit resource extraction and trade, the broader economy will continue to face the twin headwinds of the energy price shock and tariff uncertainty.
BMO will watch the flash estimate for April for a look at how Q2 started.