Canada’s economy delivered an astonishingly strong start to 2025, with first quarter growth coming in more than double expectations at an annualized rate of 2.2%. This growth surprised analysts, who had predicted a smaller increase of 1.7%. Statistics Canada has added a sizable upside surprise, announcing the nation’s real GDP expanded by an annualized 2.0% quarter-over-quarter. This development is similar to the increase witnessed in fourth quarter of 2024.
The growth recorded in the first quarter should continue to show the economy’s resilience, particularly given the continued headwinds of a negatively globally economic environment. The boost to Canada’s GDP is an indicator of strong activity spanning many industries, including widespread strength in exports.
Significant Contributions to Economic Growth
In fact, net exports were the primary driver of Canada’s economic growth in Q1. Specifically, exports of passenger vehicles jumped by 16.7% and exports of industrial machinery, equipment and parts rose by 12.0%. Together these two sectors were the largest contributors to the overall increase in exports.
Statistics Canada noted, “In the context of looming tariffs from the United States, exports of passenger vehicles (+16.7%) and industrial machinery, equipment and parts (+12.0%) drove the overall increase in exports in the first quarter of 2025.”
Total exports increased dramatically by 1.6% in the first quarter. That came on the heels of a strong 1.7% advance during the last quarter, illustrating powerful momentum. Trade exports are deep on a trend increase, reflecting ample appetite for Canadian goods overseas. Rising trade tensions continue to pose risks.
Implications of Quarterly GDP Figures
Though those quarterly GDP estimates, when annualized, paint a rosy picture of the state of the economy, they aren’t all that they’re cracked up to be. As economic analysts always warn, one-off shocks can make growth look worse over some quarters and lead to misleading interpretations. To get a true year over year picture you would have to look at the quarterly GDP numbers. To get a clearer picture, compare them to prior quarters or the same time last year.
As we have discussed, this vulnerability is made clear during the first quarter of 2020. Canada’s economy experienced a deeper economic crash from the COVID-19 pandemic than anywhere else in the world. Taken together with the astonishingly high growth figures just announced, it’s an incredible recovery for the Canadian economy. More importantly, this resilience is in sharp contrast to earlier periods.
Currency Market Reaction
At the same time, Canada announced blistering GDP growth. In a disappointing move considering this positive news, the Canadian dollar fell back a bit against its U.S. counterpart. The USD/CAD exchange rate was a small move on the day, trading under 1.3800. At the session’s nadir, USD/CAD was down 0.15%, trading at 1.3788.
For example, currency values can constantly change as the markets react to economic data releases. These changes further project investor sentiment regarding long-term growth prospects. As Canada continues to navigate complex trade relationships and domestic challenges, monitoring these currency movements will be essential for understanding broader economic trends.