Fitch Ratings (Fitch) expects Canada’s economic growth to slow this year as the country faces a slew of challenges, particularly trade uncertainty with the US. Canada’s economy expanded over 2025, but growth was stunted by US tariffs. The ratings agency believes that Canadian exporters have adapted well to trade tensions with the US, but trade disruptions still had an impact on overall economic conditions. Moving across the Atlantic, two major central banks held interest rates steady yesterday.

• Fitch expects Canada’s economy to grow by 1.1% in 2026, which would be down from the estimated 1.6% rate of growth in 2025. According to Fitch, Canada’s economic growth will slow in part due to slow personal spending and ongoing trade tensions.
• The ratings agency expects consumer spending to continue to slow this year, hindered by stalling wage growth and lower immigration. Additionally, consumer confidence is relatively low amid uncertainty about the economy.
• Looking at the labour market, Fitch projects that the unemployment rate has peaked, but more in response to lower population growth than hiring activity.
• Consumers could be helped by a stable labour market and lower interest rates, the latter of which has helped lower borrowing costs. The Bank of Canada has held its policy interest rate steady at recent meetings, believing its rate is at an appropriate level.
• Staying with central banks, the European Central Bank and Bank of England both held their policy interest rates steady at their first meetings of 2026, believing their rates are at a level to help support their respective economies.

Fitch noted that trade tensions could be less uncertain this year, but there remains the overhang of the results of the Canada-United States-Mexico Agreement review. Despite several risks facing Canada’s economy, it is still expected to grow over 2026, albeit at a slower pace. Efforts to diversify trade and improve investment may help keep the economy resilient in 2026.

If you would like to discuss this economic and market update or have questions about your finances and investments, please feel free to contact me anytime.