Canada’s economy has proven resilient through early 2026—bending, not collapsing despite significant headwinds, according to a recent RBC report.
A second consecutive gross domestic product decline in Q1 sparked recession concerns, but the underlying data tells a more encouraging story: Per-capita growth shows Canada is in an early-stage recovery rather than a contraction.
“To be clear, the economy is not strong yet. Unemployment is still too high. Population declines will continue to limit the underlying growth rate that can be generated. Sectors directly targeted by U.S. tariffs continue to underperform, and high fuel costs are cutting into household purchasing power,” said the report.
“But, headline growth numbers mask an important shift: Slowing population growth is depressing aggregate GDP while measures that reflect how households experience the economy show signs of improvement.
“On a per-person basis, the economy is still growing. The unemployment rate also edged lower (6.6% in May from 6.8% at end of 2025)—a seemingly contradictory outcome that makes sense only when accounting for the contraction in the available workforce.”
RBC said it remains cautiously optimistic that enough support remains in place to sustain gradual improvement in those per-person and per-worker economic indicators this year with further tailwinds building into 2027.
“Higher energy costs are a real headwind, particularly for lower-income households where transportation costs absorb a much larger share of disposable incomes,” it said.
“Yet currently, purchases at the gas pumps account for about 3.5% of household incomes overall —up from 2.9% in Q4, but not historically high.
“The longer the energy price shock lasts, and the higher oil prices go, the larger the threat to consumer spending. But, for now, households have broadly continued to spend.”
