Canada's Economic Recovery Called Into Question, says Commerzbank

08:56 AM EDT, 06/01/2026 (MT Newswires) -- It is rare for economists surveyed by Bloomberg to be so wide of the mark as they were in their predictions for Canada's gross domestic product released on Friday, said Commerzbank.

Instead of growing by 1.5%, the real economy contracted by 0.1% in Q1 on a quarter-over-quarter annualized basis, noted the bank. At the same time, the figure for Q4 2025 was revised downwards from a 0.6% contractuon to a 1% drop.

Some market participants had hoped that the Canadian economy was poised for recovery this year, noted Commerzbank. However, the growth figures have now definitively called the recovery into question, despite the labor market having already sent many warning signals, the bank said.

The lack of a recovery makes potential interest rate hikes by the Bank of Canada highly questionable, according to Commerzbank. For stronger growth to return, the war in Iran must end soon and relations with the United States must improve, it added.

The bank "strongly" believes this will take several more months and as such it doesn't expect an interest rate hike until this December at the earliest.

As a consequence, those anticipating lower USD/CAD levels should continue to focus on a weaker US dollar (USD) rather than a stronger Canadian dollar (CAD or loonie), it said.

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