Economy dips in April

GDP reading: GDP dropped 0.1% month-on-month in seasonally adjusted terms in April (March: +0.2% mom). On an annual basis, monthly GDP rose at a softer pace of 1.3% in April (March: +1.8% yoy), the worst result since March 2024.

Drivers: A slumping manufacturing sector was to blame for the month-on-month contraction, amid U.S. tariffs. In contrast, services activity edged up.

GDP outlook: A flash estimate points to a 0.1% GDP decline in May, as decreases in mining, energy, public administration and retail trade activity were partially offset by an increase in property sector activity.

Panelist insight: TD Economics’ Marc Ercolao said: “The downside risks to Canada's economic growth are beginning to manifest, especially in tariff-exposed sectors. April's underperformance combined with downbeat expectations for May leave second quarter growth tracking a mild contraction, setting up a sharp pullback from Q1 readings. Past this, the outlook through the belly of the year faces clear downside risk as the direct impact from tariffs add to the headwinds from plunging business and consumer sentiment.”

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