An uneven economy

Real Gross Domestic Product (GDP) remained unchanged in Q1 2026, following a quarterly contraction of 0.2% in Q4 2025, with the economy narrowly avoiding a technical recession. Subdued exports and persistent geopolitical tensions contributed to that softening, alongside changes to immigration policy. GDP per capita, however, increased by 0.2% – fewer people translating into more growth per head – highlighting an uneven economy.

The labour market, while weak in parts, is encouraging elsewhere. Canada’s vacancy rate sat at 2.8% as of Q1 2026, indicating both reduced labour demand and fewer opportunities for job seekers. However, In May 2026, 88,000 workers were added to the economy, regaining some losses from previous months, while the unemployment rate fell to 6.6%.

Inflation dynamics are also mixed. Headline inflation rose by 2.8% in April 2026, driven by a sharp increase in energy prices. In contrast, core inflation remains significantly lower at 1.5% over the same period, suggesting an energy-led inflation spike rather than a broad-based price reacceleration across goods, services and wages. Against this backdrop, the Bank of Canada held its policy rate at 2.25% in June 2026 – for now.