Interesting data point just dropped. Canada's gross domestic product expanded at 2.2% annualized in Q1, which was better than the 1.7% economists were calling for. That's now five quarters running where growth stayed above 2%, so on the surface it looks solid.

But here's where it gets tricky. The real driver was companies front-loading exports ahead of US tariffs—especially autos and industrial equipment. Once you dig into the actual domestic picture though, things look less impressive. Final domestic demand actually contracted by 0.1% annually. Household spending decelerated hard, dropping to 1.2% growth from 4.9% the quarter before. Home resales are at their lowest since early 2022. Businesses are pulling back on investment too.

So Canada's GDP growth is basically being propped up by inventory builds and export surges that might not stick around. Meanwhile, the underlying economy is softening.

This puts the Bank of Canada in a tough spot. They'd been expecting 1.2% growth and paused rate cuts back in April after cutting seven times since June of last year. Now markets are barely pricing in odds of a June cut, which tells you people think BoC will sit tight despite the economic weakness showing up in these numbers.

For context, Canada actually outpaced the US in Q1—American GDP went negative at -0.2% for the first time since early 2022. But that's not much of a win when your growth is temporary and your domestic demand is weakening. Bank CEOs are already flagging real estate concerns and consumer caution as major headwinds.

The takeaway? Canada's gross domestic product numbers look decent on paper, but the composition matters. Export-driven bounces fade. What matters is whether household and business spending can recover, and right now there's not much evidence they will anytime soon.