Canada’s economy grew at a faster pace than expected in the first quarter, adding 2.2% on an annualized basis, Statistics Canada said on Friday.
This was stronger than the expected 1.7% increase expected by analysts, driven by exports and stockpiling ahead of anticipated US tariffs.
Real gross domestic product increased by 0.5% during Q1, the same pace as Q4 2024, the agency said.
Total exports were 1.6% in Q1, led by a 16.7% increase in passenger vehicle exports and a 12% rise in industrial machinery, equipment, and parts.
While exports of vehicles and machinery soared, energy products such as crude oil (-2.5%) and refined petroleum products (-11.1%) saw declines.
Imports grew 1.1% in Q1, outpacing the previous quarter’s 0.6% rise. Notably, most passenger vehicle imports were up 8.3%, and industrial machinery and parts increased 7.4%, also linked to getting ahead of US tariffs.
Household spending growth slowed to 0.3% from 1.2% in the previous quarter, driven by higher spending on housing rents and financial services, but nearly offset by decreased purchases of passenger vehicles.
“Canadian GDP came out stronger than expected this morning while the exuberance was tempered a bit by the downward revision to the previous reading,” said Harun Thilak, Head of Global Capital Markets, North America at Validus Risk Management.
“This paints the picture of an economy moving along steadily even amidst the backdrop of uncertainties from trade tensions and tariffs.”
Thilak added that it is expected that the Bank of Canada will pause rate cuts at its meeting next week, with markets pricing in about 36 basis points of rate cuts in 2025.