Treasury
Quebec's Provincial Economy Starts 2026 at a Standstill, Says National Bank
After posting its first increase in three months in December, Quebec's gross domestic product lost momentum in January, remaining unchanged from the previous month, said National Bank of Canada.This stability in economic activity at the start of the year was due to a slight increase in the goods sector's output, which was entirely offset by a decline in activity in the services sector in the province, noted the bank.National Bank recalls that after underperforming the Canadian economy as a whole from January to July 2025, the Quebec provincial economy has grown at a pace similar to the rest of the country in recent months.However, the uptick in economic activity since the second half of 2025 hasn't been sufficient to close the gap with the rest of the country, as the Quebec economy contracted by 0.7% over 12 months compared with a 0.6% increase in Canada, stated the bank. Although this year-over-year gap is largely due to widespread underperformance in Quebec's goods sector, the province's services sector also underperformed in 10 of its 15 subsectors.Despite the less favorable economic conditions in the province, Quebec's labor market has shown considerable resilience. Since the imposition of U.S. tariffs in February 2025, the unemployment rate in the province has remained stable, while it rose by one-tenth of a percentage point across the country despite the stronger economic environment.Returning to the January data, there are some positive highlights to note, notably a second consecutive monthly increase of 0.5% in the manufacturing sector. However, activity levels in this sector remained 4.8% lower than in February 2025.National Bank also points out significant jumps in the mining and quarrying and construction sectors, as well as in the information and cultural industries. Conversely, the agriculture and forestry, utilities, wholesale trade, administrative, support, and waste management, and arts, entertainment, and recreation sectors all experienced significant declines in January, partially or completely erasing the notable gains recorded in December.Looking ahead, the sustained activity in January following December's surge is encouraging for the outlook for Q1 2026, stated the bank. However, Quebec's economy still faces numerous challenges, including persistent trade uncertainty, the upcoming renewal of the USMCA trade deal and sector-specific tariffs disproportionately impacting the province.Added to this is rising inflation due to the conflict in the Middle East, which could have beneficial effects on the economies of certain oil-producing provinces but in Quebec is likely to result in a loss of purchasing power for local households and businesses, according to National Bank.
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