Canada's Q1 Growth Weakness Prompts UBS to Lower Its 2026 Growth Forecast to 1.0%

Canada's Q1 growth weakness prompted UBS to lower its 2026 growth forecast to 1.0%, although the headline technical recession overstates the degree of underlying softness given volatile trade and inventory swings, the bank said in a note dated June 1, 2026.

Final domestic demand has weakened, with softer investment offsetting still resilient consumption, while labour market momentum remains subdued and core inflation has cooled by more than expected despite an energy-led lift in headline prices, UBS said. Against this backdrop, UBS expects the Bank of Canada to remain on hold through 2026, with a firmer and broader-based recovery more likely to emerge in 2027 as uncertainty around trade negotiations gradually clears, it added.

According to UBS, the Canadian economy entered a technical recession, with output falling for two consecutive quarters: -1.0% in Q4 and -0.2% in Q1, at an annualised rate. "Even so," it said, "the headline figures overstate the degree of underlying weakness. Volatile trade and inventory movements played a large role, while slower private and public investment left final domestic demand softer."

High Flood Scores Recorded For Municipal Bond Offerings This Week

Multiple municipal bond offerings this week have a high exposure to climate risk, specifically high Flood Scores, according to ICE Climate Data.A $16 million offering from Greenpoint Union Free School District, N.Y., records a Flood Risk Score of 5.0 out of 5.0, ICE reports. Locations with a component Physical Climate Risk Score, which includes Flood, Wildfire and Hurricane, of 2.0 or higher out of 5.0 indicate high physical climate risk due to hurricane, flooding, or wildfire events.A $195 million bond deal from Calhoun County, Texas, has a Flood Risk Score of 5.0 out of 5.0 on ICE's scale, while a $22 million tranche from Canisteo-Greenwood Central School District, N.Y., records an Acute Physical Risk Score of 5.0.Elsewhere, a $7 million offering from St. Tammany Recreation District No. 1, La., records a Combined Physical Risk Score of 3.3, and a $10 million deal from Livingston Parish, La., has a Combined Physical Risk Score of 3.3, due to their proximity to weather-related events, according to ICE Climate Data.This content is created byand includes certain data sourced from ICE Climate Data ("ICE"). Views ofdo not necessarily represent the views of ICE. ICE is not a nationally registered statistical rating organization, nor should this commentary be construed to constitute an assessment of the creditworthiness of any company or financial instrument or as providing investment advice. Climate analytics available from ICE are meant to be generally indicative of overall feature sets but should not be considered an analyst's opinion of the underlying investability of a particular location or security.The ICE Climate Risk Score is a singular, 0.0-5.0 assessment score that blends all the ICE Spatial Intelligence Platform's climate hazard models together into one rigorous, relative measure of total property risk from physical climate hazards to a given location or set of locations related to the investment. To learn more about the ICE Climate Risk Data, visit: ICE Sustainable Finance Data (https://www.ice.com/data-services/sustainable-finance-data/disclaimer)

BMO's Robert Kavcic On Biggest Factor Keeping the Recession Label Off of Canada

The lack of widespread contraction across Canadian industries, regions and components of economicgrowth is the biggest factor keeping the recession label off, BMO's Robert Kavcic said in an overnight note.Final domestic demand in the Canadian economy was still growing 1.3% y/y as of Q1, and the -0.4%q/q print followed a "chunky" 2.7% advance in the prior quarter, Kavcic noted. Government aside, the private components are very mixed -- residential investment and M&E are down from a year ago, buthousehold spending and intellectual property investment are still growing, he said. The trade war andhousing recession are clearly having an impact, but it's not being felt everywhere, he added.Stepping back, one common thread of every period officially labeled a recession since 1980 (there were four of them), was synchronized declines across these components of private domestic demand, he said.

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