Canada's Q1 GDP Reignites in Q1, But Not Enough to Push Central Bank to Change Rates, Says CIBC

09:10 AM EDT, 04/30/2026 (MT Newswires) -- Growth in the Canadian economy appears to have "reignited" in Q1, although "it still isn't running on all cylinders", said CIBC after Thursday's gross domestic product data.

Monthly GDP data for February pointed to a 0.2% month-over-month increase, which was in line with the consensus forecast and the advance estimate, noted the bank.

Among highlights, CIBC noted the manufacturing sector was "easily" the largest contributor, aided by a rebound in the auto industry following a contraction in January. An easing of supply bottlenecks in the auto industry also drove growth in wholesaling. However, trends were "decidedly more mixed" outside of those sectors, and the advance estimate for March pointed to a flat reading for that month.

For Q1 as a whole, Thursday's advance estimate suggests annualized growth of 1.7%, which is very close to the Bank of Canada's Monetary Policy Report projection of 1.5%, CIBC said. However, the slowing of momentum again in March, combined with the Survey of Employment, Payrolls and Hours (SEPH) data also on Thursday showing a decline in employment in February (-60,000), may be a concern for what's to come in Q2, it added.

Overall, though, movements in oil markets as well as any signs of whether inflationary pressures are spreading to core metrics, will continue to be more important in determining whether the Bank of Canada feels the need to raise rates this year, according to CIBC.

CIBC continues to believe that there's enough slack within the economy to keep core measures of inflation fairly muted, even as the impact of higher energy prices passes through in some areas, which will enable the BoC to leave rates on hold through 2026.

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