BMO Lifts Its Canada GDP Growth Estimate for Q1; Sees 2026 GDP Expansion at "Very Modest" 1.0%

10:53 AM EDT, 03/31/2026 (MT Newswires) -- Canadian real gross domestic product was firmer than expected in the first two months of the year, despite a seemingly endless winter and a slew of weak headline results from manufacturing and employment early in 2026, said Bank of Montreal (BMO).

GDP nudged up 0.1% month over month in January, which was better than the flat flash, and Tuesday's flash reading on February points to a "surprisingly sturdy +0.2% month-over-month growth, noted the bank. However, this decent performance preceded the conflict in Iran and the consequent spike in gasoline and other fuel prices, but it suggests the economy was in somewhat better shape than anticipated heading into the turmoil.

The "one-two combo" of somewhat better-than-expected growth in both of the first two months of the year sets a much better tone to Canada's Q1 gross domestic product than anticipated, pointed out BMO.

The bank stated it upgraded its GDP estimate for Q1 to 1.5% from 0.8%, but that only brings it back up close to where the Bank of Canada initially expected growth -- in the January Monetary Policy Report, the BoC called for 1.8%.

However, BMO believed that the upswing in fuel prices will weigh on consumer sentiment and take a bite out of spending in the coming months, and look for growth to ebb to 1.0% in Q2.

That happens to be the bank's call for full-year GDP growth, following last year's "so-so" 1.7% advance.

In effect, Tuesday's GDP "decent" results in the pre-Iran war period offset what likely would have been a moderate growth trim for the spring, leaving the 2026 outlook more or less in place at a "very modest" 1.0% pace, according to the bank.

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