Royal Bank of Canada maintains its growth outlook for Canada despite a first-quarter GDP decline, citing consistent slack indicators.
Canada’s economy shrank in the first quarter, yet Royal Bank of Canada left its growth forecast unchanged. The bank attributed the contraction to temporary factors while noting that measures of excess slack, such as the unemployment rate, remain aligned with prior expectations.
Potential GDP estimates were lowered to reflect the weaker print, but policy rates at the Bank of Canada and the Federal Reserve are still viewed as appropriate. Both central banks are expected to hold rates steady through 2026, with modest increases projected for the BoC afterward.
The analysis highlights moderate excess supply in Canada compared to excess demand in the U.S., reinforcing the divergence in economic conditions between the two countries.