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Canada's Weak Q1 GDP, Softer Domestic Demand Put Growth Risks in Focus, Says Nomura

BY MT Newswires | ECONOMIC | 06:30 AM EDT

06:30 AM EDT, 06/01/2026 (MT Newswires) -- Growth momentum continued to soften in Q1 as downside risks persist in Canada, said Nomura after Friday's Q1 gross domestic product data.

Real GDP fell 0.1% quarter-over-quarter annualized in Q1 after a revised 1.0% contraction in Q4, below consensus and the Bank of Canada's expectation, noted Nomura.

While this puts Canada in a technical recession, the bank thinks the more important signal was the weaker underlying momentum.

Final domestic demand fell 0.4% quarter-over-quarter annualized, reversing part of Q4's 2.7% gain and pointing to softer underlying domestic demand beyond volatile trade and inventory swings, stated Nomura.

Net exports remained a drag as imports surged, largely due to gold, while exports remained under pressure from United States tariffs.

Weaker auto exports more than offset stronger energy shipments, underscoring the continued trade hit, added the bank.

Business investment was notably weak. Unlike the U.S., Canada hasn't seen a meaningful Artificial Intelligence-related capital expenditure boost, pointed out Nomura.

MT Newswires does not provide investment advice. Unauthorized reproduction is strictly prohibited.

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