RBC Economics presents an in-depth analysis of the key drivers of economic activity in Canada and the United States, including global factors that affect near-term forecasts.
Canada’s economic outlook has evolved broadly in line with our cautiously optimistic view from Q4 2025—the economy remains resilient despite ongoing challenges:
- Per-person GDP growth rose for the first time in three years in 2025, and per-worker labour market conditions have begun to improve.
- Most Canadian exports remain duty-free via the CUSMA exemption to new Section 122 tariffs.
- Fiscal policy support is ramping up. Government spending jumped an annualized 6% in Q4, led by defence spending.
- An energy price spike from the Middle East conflict boosts oil-producing regions but threatens household affordability concerns, particularly at the lower end of the income distribution.
- Labour market stabilization has been broadly based, but downside risks remain, including tariff uncertainty with potentially contentious CUSMA renegotiations this summer and the impact of sharp population growth slowing on GDP.
The provincial outlook diverges: Alberta and Saskatchewan lead growth projections at 2.5% and 2.3% respectively in 2026, boosted by elevated commodity prices, while Ontario and Quebec face headwinds at 0.9% each due to manufacturing sector pressures and population declines.
“Canada’s economic outlook so far in 2026 has evolved broadly in line with our cautiously optimistic view a quarter ago. The economy is not yet strong, but has remained more resilient than feared when US tariff threats began escalating a year ago.”