With Canadians heading to the polls on Monday, we’re watching February’s gross domestic product report on Wednesday, including an early estimate for March, for clues on what type of economy the next government inherits as tariff headwinds continue to build. We expect a flat reading for February GDP—broadly in line with Statistics Canada’s early estimate a month ago that showed output was “essentially unchanged,” which is a sharp slowing from a 0.4% increase in January and ending a two month run of per-capita increases. This cooling is expected to be broad-based across sectors, but also reflects a 6% drop in non-conventional oil extraction.

Home resales also pulled back more than 7% as a drop in consumer confidence coupled with severe winter weather in parts of the country caused potential buyers to delay purchases. Meanwhile, manufacturing output likely held largely steady and retail sale volumes fared better than feared given plunging consumer confidence. The preliminary estimate for March GDP could look softer.

Employment declined by 33,000 in March—the largest decline in three years—and, the unemployment rate ticked higher. The advance estimate of March retail sales was higher (+0.7%), likely boosted in part by a rush to buy vehicles ahead of auto tariffs in April. But the early estimate of March manufacturing sales was down 1.9%, potentially reflecting the early impact of tariffs imposed in early in the month.

In the United States, we expect GDP edged outright lower in Q1—in part due to a pull-back in net trade as imports surged ahead of new tariffs, but consumer spending growth also slowed sharply, potentially to a rate below 1% for the first time since 2020. Tariffs represent a significant risk to the U.S. economy, but it is likely too early to see a significant pullback in labour markets. Jobless claims remain low and early indicators of hiring demand from online job postings are not flagging a sharp decline into early April.

We expect payroll employment rose by 138,000 in March with the unemployment rate ticking up to 4.3%. Week ahead data watch