Canada will release gross domestic product data for Q1 on Friday, said RBC.
Canada's economy likely returned to growth in Q1 with GDP bouncing back by an annualized 1.7% after declining 0.6% in Q4, supported by improving domestic growth drivers, noted the bank.
Details behind the decline in Q4 were less concerning than headlines -- domestic demand improved with governments, consumers, and businesses all increasing spending, while the offset mainly came from using up inventories, and another decline in residential investment, stated RBC.
Residential investment will remain a soft spot in Q1 with home resales continuing to decline, but household and government spending have both been picking up and a large inventory subtraction in Q4 is unlikely to be repeated, it added.
A surge in Q1 imports could leave net exports subtracting about four percentage points from growth, but that's also consistent with firming consumer spending and business investment. Temporary disruptions from large strikes in the education and transportation (postal) sectors subtracted from Q4 growth, but will add to Q1 output with workers back on the job.
Broadly, the 1.7% quarterly annualized growth in Q1 was again against a backdrop of rapidly slowing immigration and population growth. By the bank's count, interpolating recent demographic trends -- specifically a declining non-permanent resident population -- would suggest little change in overall population in Q1, and further acceleration in per capita economic growth.
This remains consistent with RBC's overall expectation that per-person economic conditions in Canada should continue to improve this year after rising in 2025 for the first time in three years. That is, however, contingent on key assumptions that oil prices start to normalize beyond this quarter, and broader United States tariffs won't escalate, accoridng to the bank.