Canada’s economic growth is expected to remain modest in 2026 as businesses navigate elevated trade uncertainty, uneven consumer conditions and ongoing geopolitical risk. With CUSMA negotiations approaching and U.S. political dynamics adding volatility, investors may need to focus more on company fundamentals than broad economic trends.
BNN Bloomberg spoke with Chris Murray, managing director of institutional research at ATB Capital Markets, about why GDP growth is likely to hover around 1.2 per cent, how consumer spending is diverging across income levels, and where selective opportunities may emerge despite a low-growth backdrop.
Key Takeaways
- Canada’s GDP growth is expected to remain modest at roughly 1.2 per cent in 2026, reflecting persistent uncertainty tied to trade policy and geopolitical risk.
- The upcoming CUSMA review and unpredictable U.S. political dynamics are expected to keep business confidence and capital investment constrained.
- Consumer spending remains uneven, with higher-income households driving strength in travel and luxury goods while lower-income consumers face wage and employment pressures.
- In a low-growth environment, stock selection is expected to matter more than broad index performance, with company execution and balance sheet strength taking priority.
- Transportation, engineering and industrial firms with strong backlogs and diversified exposure may benefit despite subdued industrial production.
Read the full transcript below:
ANDREW: Our guest expects economic uncertainty to continue in Canada this year, particularly with renegotiations of the North American free trade pact and unpredictable U.S. politics. He believes economic growth will be limited to about 1.2 per cent. We’re joined by Chris Murray, managing director of institutional research at ATB Capital Markets. Chris, great to see you. Thanks very much for joining us. It sounds like a tough year ahead — maybe not a contraction, but plenty of headwinds.
CHRIS: Yes, certainly, Andy. When we started thinking about our outlook for 2026, it wasn’t just about the level of economic growth but also the amount of uncertainty we’re seeing. If you look back to April 2025, we saw record levels of uncertainty in both Canada and the U.S., largely tied to tariff implementation.
In Canada, the CUSMA agreement — the Canada-U.S.-Mexico free trade agreement — is set to be reopened on July 1, and that framework has protected a lot of Canadian industry so far. On the macro front, we think uncertainty will remain elevated, and that’s what will make 2026 interesting. It’s likely to be a year where individual stock selection matters more than broad economic or index-level growth.
ANDREW: How much does the Canadian consumer factor into your thinking? People often feel the economy is worse than it actually is, and Canada doesn’t appear to be in recession right now.
CHRIS: That’s right. We’ve heard a lot about the so-called K-shaped consumer, and that’s very much what we’re seeing. At the higher end of the income spectrum, spending remains strong — on luxury goods, autos and travel.
At the lower end, there’s continued pressure on wages, concerns about employment quality and tighter discretionary spending. Some U.S. retailers have noted consumers trading down in certain areas, but at the same time, travel demand remains very healthy, and luxury vehicles have been a bright spot despite a tighter automotive market.
ANDREW: Speaking of travel, Air Canada is one of the stocks you favour right now. What’s the upside there?
CHRIS: We have a $32 price target and an outperform rating on Air Canada. We believe the company is well positioned to benefit from strong travel demand, particularly from baby boomers and Canadians travelling both internationally and domestically.
Business travel has also held up well, and that’s reflected in the demand trends we’re seeing. This year will be interesting as new aircraft enter the fleet, opening up opportunities to serve destinations that weren’t previously accessible.
ANDREW: What about AtkinsRéalis, the engineering firm? Where do you see the upside?
CHRIS: There are really three main factors. First is the broader backdrop, with increased focus on building and infrastructure in both Canada and the U.S., which should benefit the company. Organic growth has been strong, running in the high single digits, and we expect that to continue.
Second, mergers and acquisitions have historically been an important part of the story, and we think that becomes more significant again this year as the business continues to improve.
The third piece is nuclear. AtkinsRéalis has CANDU technology, but it’s also exposed to other parts of the nuclear value chain, including small modular reactors and related services. With operations in Canada, the U.S., Europe and the U.K., we believe nuclear will be a meaningful growth driver in the years ahead.
ANDREW: We’ve only got a moment left, but you also see upside in NFI Group, the bus manufacturer.
CHRIS: We do. NFI has spent the past few years dealing with the after-effects of the pandemic, but we think it’s now set up for a strong recovery in earnings. Backlogs are at record levels, funding conditions are supportive, and the company has manufacturing capabilities on both sides of the border, which helps insulate it from tariffs.
We expect very strong earnings growth, and that should support a re-rating of the shares over time.
ANDREW: Chris, thanks very much. We appreciate it.
CHRIS: Thanks, Andrew.
ANDREW: Chris Murray, managing director of institutional research at ATB Capital Markets.
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This BNN Bloomberg summary and transcript of the Jan. 7, 2026 interview with Chris Murray are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.
