Real gross domestic product (GDP) increased 0.5% in the first quarter, the same pace as in the fourth quarter of 2024. Exports of goods drove the growth in the first quarter of 2025, followed by accumulations of business non-farm inventories. Higher imports and weak residential structure resale activity tempered overall growth in the first quarter, according to a report released Friday by Statistics Canada.
On a per capita basis, real GDP was up 0.4% in the first quarter, after increasing 0.1% in the previous quarter. In the first quarter, final domestic demand, which represents total final consumption expenditures and investment in fixed capital, did not increase for the first time since the end of 2023, it said.
“Total exports rose 1.6% in the first quarter of 2025 after increasing 1.7% in the fourth quarter of 2024. In the context of looming tariffs from the United States, exports of passenger vehicles (+16.7%) and industrial machinery, equipment and parts (+12.0%) drove the overall increase in exports in the first quarter of 2025. Meanwhile, there were lower exports of crude oil and crude bitumen (-2.5%) and refined petroleum energy products (-11.1%),” explained Statistics Canada.
“Imports increased 1.1% in the first quarter, following a 0.6% rise in the previous quarter. Higher imports of industrial machinery equipment and parts (+7.4%) and passenger vehicles (+8.3%) led the overall increase. The threat of tariffs can be expected to influence trading patterns and incite importers to increase shipments prior to these tariffs being implemented to avoid additional costs. At the same time, travel imports fell 7.0% in the first quarter, as fewer Canadians travelled to the United States.”
Photo by James Wheeler
Andrew Grantham, Senior Economist, CIBC Capital Markets, said that while headline GDP growth was solid in Q1, it was flattered by a surge in exports as companies looked to front-run potential US tariffs. Domestic demand was weak during the quarter, and monthly data point towards only slight upward momentum heading into Q2.
“Early tracking for Q2 (assuming flat readings for May and June) points towards modest growth of 0.5% annualized,” he said.
Douglas Porter, Chief Economist at BMO Capital Markets, said the Canadian economy looks to have held up reasonably well in the opening months of the trade war, and even the most recent figure for April suggests growth is weathering the trade storm.
“The key point here is that the GDP figures are sending no obvious distress signals so far in 2025. While we can certainly quibble around the details, the Bank of Canada will surely seize on the headline outcome as well as the decent gain for April. With this sturdy set of results, we are officially abandoning our call of a rate cut next week, and now look for the next rate trim eight weeks hence at the late-July decision.”
Andrew Hencic, Director & Senior Economist, TD Economics, said the top line measure would suggest the Canadian economy continues to chug along at a decent clip, but digging beneath the surface suggests otherwise.
“Trade tensions and the uncertainty they heaped on the economy have started to show through on activity. Consumers have taken their foot off the gas, and absent the potential front running of tariffs leading to a buildup of inventory (and potentially some equipment installation) there wasn’t much to celebrate on the business investment front either.
“Markets have all but ruled out a cut from the Bank of Canada (BoC) next week. However, when looking beyond the headlines there are some real cracks emerging in the economy. The unemployment rate is up to 6.9% (6.6% in January and 6.2% last April), and domestic demand has all but petered out. With the tailwinds from last year’s rate reductions fading, the BoC should have room to deliver two more rate reductions this year and give the economy a bit more breathing room.”
Mario Toneguzzi
Mario Toneguzzi is Managing Editor of Canada’s Entrepreneur. He has more than 40 years of experience as a daily newspaper writer, columnist, and editor. He was named in 2021 and 2024 as one of the top business journalists in the world by PR News. He was also named by RETHINK to its global list of Top Retail Experts 2024 and 2025.
About Us
Canada’s Entrepreneur is the number one community media platform in Canada for entrepreneurs and business owners. Established in 2016, our podcast team has interviewed over 800 Canadian entrepreneurs from coast-to-coast. With hosts in each province, entrepreneurs have a local and national format to tell their stories, talk about their journey and provide inspiration for anyone starting their entrepreneurial journey and well- established founders.
The commitment to a grass roots approach has built a loyal audience on all our social channels and YouTube – 500,000+ lifetime YouTube views, 250,000 + audio downloads, 50,000 + average monthly social impressions, 15,000 + engaged social followers and 120,000 newsletter subscribers. Canada’s Entrepreneur is proud to provide a local, national and international presence for Canadian entrepreneurs to build their brand and tell their story
