{"id":72847,"date":"2026-04-30T16:48:12","date_gmt":"2026-04-30T16:48:12","guid":{"rendered":"https:\/\/www.pantheregroup.com\/2026\/04\/30\/factory-rebound-could-be-head-fake-warn-economists-who-say-canada-is-losing-ground-to-tariffs\/"},"modified":"2026-04-30T16:48:12","modified_gmt":"2026-04-30T16:48:12","slug":"factory-rebound-could-be-head-fake-warn-economists-who-say-canada-is-losing-ground-to-tariffs","status":"publish","type":"post","link":"https:\/\/www.pantheregroup.com\/2026\/04\/30\/factory-rebound-could-be-head-fake-warn-economists-who-say-canada-is-losing-ground-to-tariffs\/","title":{"rendered":"Factory rebound could be head fake, warn economists who say Canada is losing ground to tariffs"},"content":{"rendered":"<p> \n<br \/><iframe loading=\"lazy\" title=\"Bank of Canada signals rate hikes would be &#039;consecutive&#039;\" width=\"1080\" height=\"608\" src=\"https:\/\/www.youtube.com\/embed\/krmkk0iFVzs?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe><\/p>\n<p> Canada\u2019s economy expanded 0.2 per cent in February, but growth looks set to tail off in March to close out the first quarter, giving the Bank of Canada a reason to keep interest rates steady for now, economists say. <\/p>\n<p> The month\u2019s gross domestic product (GDP) growth matched analysts\u2019 estimates and, coupled with Statistics Canada\u2019s flash estimate for March, economists expect the economy to expand at an annualized rate that matches the Bank of Canada\u2019s estimate of 1.5 per cent for the first quarter after a contraction in the final quarter of 2025. <\/p>\n<p> Here\u2019s what economists think the numbers mean for the economy, the Bank of Canada and interest rates. <\/p>\n<h2>\u2018Stall in March\u2019: CIBC<\/h2>\n<p> <span>\u201cGrowth in the Canadian economy appears to have reignited in the first quarter, although it is far from running on all cylinders, and March\u2019s advance estimate points to a stall again at the end of the quarter,\u201d Andrew Grantham, an economist at CIBC Capital Markets, said in a note.<\/span> <\/p>\n<p> Manufacturing was the largest contributor to growth as the auto sector rebounded, but he said results in other areas of the economy were \u201cdecidedly mixed,\u201d with real estate activity contracting for the fourth consecutive month and government administration down two months in a row, likely due to cuts at the federal and provincial levels. <\/p>\n<p> Signs of some consumer weakness also popped up on \u201cbroadly flat\u201d retail spending and declining growth in food and accommodation. <\/p>\n<p> CIBC estimates first-quarter annualized growth of 1.7 per cent, but said \u201cthe apparent stall again in March is a concern regarding momentum heading into the spring.\u201d <\/p>\n<p> Consumer spending is likely to remain sluggish due to the cost of filling up at the pump and the jobs market is slow, indicating there remains plenty of slack in the economy, Grantham said. <\/p>\n<p> That means core inflation should remain tame, despite higher energy prices, giving the Bank of Canada cause to maintain interest rates at their current level of 2.25 per cent. <\/p>\n<h2>\u2018Tug-of-war\u2019: Servus<\/h2>\n<p> \u201cToday\u2019s GDP report shows that economic activity was robust going into the energy shock caused by the war with Iran,\u201d Charles St-Arnaud, chief economist at Servus Credit Union Ltd., said in a note. <\/p>\n<p> His first-quarter GDP estimate is 1.7 per cent annualized, just above the Bank of Canada\u2019s forecast. <\/p>\n<p> Manufacturing led the way in February, growing 1.8 per cent month over month, the largest increase since January 2023, but activity in the sector is 2.4 per cent lower than it was in March 2025 due to the effects of United States tariffs. <\/p>\n<p> The services side of the economy grew 0.1 per cent month over month in February on increases in transportation and warehousing, wholesale trade and retail, while other areas such as entertainment, education and public administration slumped. <\/p>\n<p> St-Arnaud said he expects the increase in oil prices will prove a \u201cnet negative\u201d for the economy, driving up consumer and business costs, but not investment in the oil sector in the near-term. <\/p>\n<p> As a result, the Bank of Canada \u201cfaces a tug-of-war on the direction of monetary policy,\u201d he said. <\/p>\n<p> The economy could be dragged down by higher oil prices and trade talks with the U.S. while higher energy costs accelerate inflation. <\/p>\n<p> For now, he expects policymakers will continue to hold interest rates at their current level. <\/p>\n<p> \u201cHowever, it is clear that the longer oil prices remain elevated, the more likely the (Bank of Canada) may need to hike rates,\u201d he said. <\/p>\n<h2>\u2018Vulnerable\u2019: National Bank of Canada<\/h2>\n<p> \u201cOverall, the data released this morning confirm that the Canadian economy has held up in Q1 despite current headwinds,\u201d National Bank of Canada economists Matthieu Arseneau and Alexandra Ducharme said in a note. <\/p>\n<p> National Bank is calling for the economy to grow 1.7 per cent in the first quarter, but its economists expressed caution regarding manufacturing\u2019s \u201cstrong\u201d rebound, arguing it \u201cwould be a mistake to rejoice in the sector\u2019s strength\u201d given that the rebound was mostly due to auto plants powering up again following production stoppages at the start of the year to change models, retool and do maintenance. <\/p>\n<p> The manufacturing sector has shrunk 3.1 per cent year over year and the auto sector, which includes motor vehicles and parts, is down 6.8 per since from February 2025, the economists said. <\/p>\n<p> Excluding manufacturing, Canada\u2019s economy stagnated in February, they said. <\/p>\n<p> Despite the flat growth reading for March, 12 of the 19 sectors posted growth in the first quarter, Arseneau and Ducharme said. <\/p>\n<p> \u201cThe Canadian economy remains vulnerable due to tariff uncertainty and now, the global geopolitical situation,\u201d they said. <\/p>\n<ul class=\"related_links\">\n<li>Canada&#8217;s GDP rises 0.2% as manufacturing sector regains momentum<\/li>\n<li>Canada&#8217;s economy is on a &#8216;rollercoaster&#8217; that the Bank of Canada will have to ride, economists say<\/li>\n<\/ul>\n<p> Any benefit to some sectors from higher oil prices will be offset by the hit to consumers, who are looking at higher inflation. <\/p>\n<p> They also pointed to a drop in real estate values as the housing market continues to slump and causes a \u201cnegative wealth effect \u2014 another headwind for consumers.\u201d <\/p>\n<p> National Bank said it expects the Bank of Canada\u2019s next move to be hikes, not cuts, though the timing is unclear. <\/p>\n<p> <em>\u2022 Email: gmvsuhanic@postmedia.com<\/em> <\/p>\n\n<br \/>Factory rebound could be head fake, warn economists who say Canada is losing ground to tariffs<\/a><br \/>\n<br \/>2026-04-30 16:48:12<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Canada\u2019s economy expanded 0.2 per cent in February, but growth looks set to tail off in March to close out the first quarter, giving the Bank of Canada a reason&#8230;<\/p>\n","protected":false},"author":2,"featured_media":72848,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[31],"tags":[],"class_list":{"0":"post-72847","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy"},"_links":{"self":[{"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/posts\/72847","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/comments?post=72847"}],"version-history":[{"count":0,"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/posts\/72847\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/media\/72848"}],"wp:attachment":[{"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/media?parent=72847"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/categories?post=72847"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/tags?post=72847"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}