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.
A second consecutive gross domestic product (GDP) decline in Q1 sparked recession talk. But Canada’s economy has proven resilient through early 2026—bending, not collapsing, despite significant headwinds:
- The Q1 decline in GDP sparked recession concerns, but the underlying data tells a more encouraging story: Per-capita growth shows Canada is in an early-stage recovery rather than a contraction.
- The unemployment rate edged lower to 6.6% in May, down from 6.8% at the end of 2025.
- Canada’s trade position has proven more durable than expected: the CUSMA framework continues to shield most exports from the latest round of US tariffs.
- Both federal and provincial governments are increasing spending, with most growth benefits expected to flow through in 2027 or beyond. Government spending jumped an annualized 6% in Q4 2025, led by a surge in defence outlays.
- Energy-producing provinces are among the few parts of Canada where growth is running ahead of pre-tariff expectations. Alberta leads provincial growth projections at 2.5% in 2026, powered by elevated commodity prices and energy sector investment.
“We remain cautiously optimistic that enough support remains in place to sustain gradual improvement in those per-person and per-worker economic indicators this year with further tailwinds building into 2027.”
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