SKN | BMO Raises Q1 GDP Outlook but Sees Modest 2026 Growth at 1.0%

Key Points

• Bank of Montreal raised its Q1 GDP estimate for Canada.
  
• Full-year 2026 growth is still projected at a modest 1.0%.
  
• The outlook reflects stronger near-term momentum but persistent structural headwinds.

Bank of Montreal has upgraded its forecast for Canada’s first-quarter economic growth, indicating stronger-than-expected momentum at the start of 2026.

The revision suggests that recent data, including consumer activity and labor market stability, has come in ahead of earlier projections, supporting a more positive near-term outlook.

Full-Year Growth Remains Subdued

Despite the improved start, Bank of Montreal continues to project full-year GDP growth of around 1.0%.

This points to a low-growth environment, with structural challenges such as slower credit expansion, elevated household debt, and the lingering effects of prior interest rate hikes expected to weigh on economic activity.

Structural Headwinds Still in Play

The bank’s outlook highlights that while short-term data may be encouraging, underlying economic pressures remain.

Higher borrowing costs and tighter financial conditions are likely to continue limiting both consumer spending and business investment, contributing to a more restrained growth trajectory over the remainder of the year.

Policy and Market Implications

The modest growth forecast could influence expectations for the Bank of Canada, particularly in balancing inflation control with economic support.

A slower growth environment may encourage policymakers to adopt a more cautious approach, with markets closely watching incoming data for confirmation of either resilience or slowdown.

Outlook

Bank of Montreal presents a two-speed view of Canada’s economy, with stronger early-year momentum followed by softer overall growth.

Investors and policymakers will focus on whether this initial strength can be sustained or if structural headwinds ultimately dominate the economic outlook.

For confidential inquiries, partnership opportunities, or deeper insights into macroeconomic trends, policy outlooks, and investment strategies, we invite you to connect directly with the SKN team for professional engagement.