February 27, 2026

Canada’s GDP fell in 25Q4, but it’s not as bad as it sounds:

Statistics Canada reported a fourth-quarter contraction in real gross domestic product Friday that economists argue conceals some promising details in underlying economic data.

Statscan said Friday that real GDP declined 0.6 per cent on an annualized basis in the fourth quarter, falling short of expectations for flat growth from the Bank of Canada and most economists.

Statscan said the main culprit was businesses drawing down their inventories – in other words, selling off goods or materials that weren’t reproduced in the quarter.
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StatCan said a rise in household spending and increased government capital spending – particularly on weapons systems – gave the economy a lift in the quarter. Business investment, meanwhile, declined thanks to weakness in residential activity.
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Last quarter’s contraction came after real GDP growth of 2.4 per cent in the third quarter, which Statscan revised down slightly from initial estimates. The economy also shrank in the second quarter as tariffs took full effect in the economy, but Statscan also revised that decline to 0.9 per cent from previous estimates of a steeper 1.8 per cent contraction.
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StatCan said real GDP rose 1.7 per cent in 2025 overall, cooling from 2-per-cent growth in each of the previous two years and marking the slowest pace of annual growth since 2016, outside the COVID-19 pandemic.

And the US PPI caused shock and consternation:

U.S. producer prices accelerated in January, with the cost of goods outside the volatile food and energy category increasing by the most in more than 3½ years as businesses passed on import tariffs and raised prices at the start of 2026.

The stronger-than-expected increase in the Producer Price Index reported by the Labour Department on Friday reinforced economists’ expectations that the Federal Reserve would not resume cutting interest rates before its June 16-17 meeting.

The PPI was boosted by a widening in margins, including for professional and commercial equipment wholesaling as well as apparel, footwear and accessories retailing.
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In the 12 months through January, the PPI increased 2.9 per cent after rising 3 per cent in December. The moderation in the year-on-year producer inflation rate reflected the dropping out of last year’s high readings from the calculation.

Core PPI rose 0.8 per cent last month after gaining 0.6 per cent in December. Core producer inflation increased 3.6 per cent on a year-over-year basis. The report was delayed by a brief shutdown of the federal government that ended early this month.

Services prices jumped 0.8 per cent in January, reflecting a 2.5 per cent increase in trade services, which measure changes in margins received by wholesalers and retailers. Margins for professional and commercial equipment wholesaling surged 14.4 per cent, indicating businesses were passing on tariffs.
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The PPI report contributed to a stock market drop on Wall Street. The dollar slipped against a basket of currencies. U.S. Treasury yields mostly fell.