Bank of Canada Governor Tiff Macklem on Thursday said he expected second quarter growth to be "quite a bit weaker" than the first quarter, citing sluggish investment and the effect of U.S. tariffs.
The central bank last month forecast that annualized first quarter GDP would be 1.8% but did not give any other forecasts, citing uncertainty over U.S. tariff policy.
Statistics Canada is due to issue first quarter GDP data on May 30 and Macklem said he expected exports to hold up growth, given that firms had rushed to send goods to the U.S. before tariffs took effect in April.
"I expect the second quarter will be quite a bit weaker, just because the consequence of a pull forward means you're going to have less in the next quarter," he told a televised press conference after a meeting of G7 finance ministers and central bank governors in Banff.
He also said consumption and business investment would be sluggish, given firms were pausing their plans.
"Where we go from there, I think, really depends on where does what happens to tariffs," he said. The bank last month provided two scenarios as to what might happen.
In the first scenario, most tariffs would be negotiated away, and Canadian and global growth would weaken temporarily. Canadian inflation would fall to 1.5% for a year and then return to the bank's 2% target.
In the second scenario, the tariffs would spark a long-lasting global trade war. Canada enters a significant recession, inflation would spike above 3% in mid-2026 before returning to 2%.
