These are the weak spots in the Canadian economy, RBC says

Royal Bank of Canada economist Abbey Xu said Canada’s economy maintained momentum in February as temporary January drags faded, with real GDP rising 0.2% in line with Statistics Canada’s advance estimate and RBC’s forecast.

Xu said growth was supported by both goods-producing industries, up 0.4%, and services, up 0.1%. Manufacturing rebounded as auto production normalized after January model-changeover shutdowns, while wholesale trade and transportation also recovered.

“The bottom line: Canada’s GDP growth increased 0.2% in February, matching Statistics Canada’s advance estimate and our own expectations,” Xu said in her April 30 report.

Retail GDP rose 0.2% for a second straight monthly gain, which Xu said pointed to continued resilience in consumer spending. RBC’s cardholder data also showed spending held up in March despite higher gasoline prices.

Weakness was concentrated in construction, the public sector and arts, entertainment and recreation, with the latter hit by the two-week NHL break during the Olympics.

Statistics Canada’s advance estimate showed March GDP was “essentially unchanged,” but Xu said early indicators suggest momentum held into the end of the first quarter. RBC now sees Q1 GDP tracking at about 1.7% annualized, slightly above its 1.3% forecast and the Bank of Canada’s 1.5% projection.

Xu said RBC continues to expect the Bank of Canada to hold rates steady through the rest of 2026, while monitoring underlying inflation and the broader economic impact of higher energy costs tied to the Middle East conflict.

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