-- With population growth slowing, per-capita improvement is expected to continue, RBC said Thursday, while noting that on a quarterly basis, Canadian business activity remains broadly consistent with its base case for moderate expansion, with Q1 GDP tracking slightly higher than RBC's own forecast of 1.3% annualized GDP growth, as well as the Bank of Canada's 1.5% projection in its April Monetary Policy Report.
For the BoC, RBC's base case remains unchanged. RBC expects the BoC to hold rates steady for the remainder of 2026, although it noted the central bank signaled at its April meeting that it will be keeping a close eye on the evolution of underlying inflation (ex-energy) measures and broader economic growth implications from higher energy costs due to the ongoing conflict in the Middle East.
Canada's gross domestic product growth increased 0.2% month over month in February, matching Statistics Canada's advance estimate and RBC's own expectations. Both goods-producing and services industries contributed to the gain as temporary disruptions in the auto sector in January started to unwind. Manufacturing and wholesale trade rebounded as auto production normalized following earlier model changeover shutdowns, while retail GDP advanced 0.2%, pointing to ongoing resilience in consumer spending. Weak spots in February were concentrated in construction, the public sector, and an added decline in entertainment, attributed to the two-week break in NHL games during the Olympics, noted RBC.
Looking ahead, the advance estimate for March GDP was "essentially unchanged." Those early estimates are highly revision-prone, but early indicators for March suggest growth momentum has held steady into the end of Q1, said RBC.
Hours worked edged higher by 0.2%, while advance manufacturing sales rose 3.5% in March -- in part reflecting higher oil prices, but also consistent with further recovery in auto production. Excluding oil and related products, advance wholesale sales also rose 1.3%, RBC noted.