No Market Reaction to Canada's GDP as Focus Remains On Iran War, Says CIBC

10:17 AM EDT, 03/31/2026 (MT Newswires) -- It wasn't great, but it wasn't as bad a start to the new year for the Canadian economy as expected, said CIBC after Tuesday's gross domestic product data.

GDP advanced by 0.1% month over month, a tick above the consensus forecast. That was driven by strength in goods-producing sectors, namely oil and natural gas extraction, mining/quarrying, and construction, which masked a decline in manufacturing.

Momentum increased in February, as the advance estimate pointed to a 0.2% month-over-month gain, which leaves Q1 GDP tracking roughly in line with the Bank of Canada's Monetary Policy Report forecast of just under 2%, noted CIBC.

However, that still leaves GDP only 0.6% above year-ago levels following a challenging 2025, and ample economic slack remains, which leaves the BoC on the sidelines despite an upcoming energy-driven spike in the consumer price index, stated the bank.

Despite leaving Q1 GDP tracking roughly in line with the BoC's forecast, the growth outlook ahead faces hurdles as consumption will be squeezed by higher gasoline prices, while activity in trade-sensitive sectors remains "choppy" and is likely to remain that way until there is progress on renewing the CUSMA trade deal, added CICB. With risks to underlying momentum, the BoC is likely to keep interest rates on hold until there are signs of a sustainable reduction in economic slack, likely into 2027.

There was little market reaction to the GDP data on Tuesday, as headlines around the Iran war captured more attention, the bank pointed out.

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