By TD Economics

• 2025 is shaping up to be a modestly better year than expected in our prior forecast. However, our provincial growth rankings are largely unchanged. Observed weakness in large manufacturing bases in Central Canada is as expected, while idiosyncratic factors are driving firmer performances elsewhere.
• Exports coast-to-coast dipped in the second quarter following a front-running of export activity to the U.S. the quarter prior. The outlook for Canadian trade has marginally improved as effective tariff rates have come in lower than our expectations. Across provinces, nominal exports to the U.S. from Quebec, Saskatchewan and Alberta have underperformed the nation as a whole. Evidence of an export rotation to non-U.S. markets is limited, with Ontario, Alberta, Newfoundland and PEI showing some promise.
• All provinces have taken steps towards the removal of interprovincial trade barriers. Ontario has arguably gone the furthest, followed by Nova Scotia, Manitoba, B.C. and PEI. Newfoundland and Labrador and New Brunswick have been more cautious. These encouraging developments could help offset some of the disruption caused by the Canada U.S.-trade war, but the scale of the boost could be limited. Notably, geographic barriers still exist, and not all provinces have trade agreements in place.
• We’re retaining our view that Canadian housing will continue its recovery, fueled by pent-up demand in B.C. and Ontario, although loose conditions will restrain the extent of price gains in these two markets. Activity remains considerably firmer outside of these two markets, with mid-to-high single-digit price growth performances on tap in the Atlantic, most of the Prairies and Quebec this year and next.
• Canada’s job market has recently shed over 100k jobs, driving the national unemployment rate to a cyclical high. Ontario has disproportionately absorbed the shock so far this year as its unemployment rate has risen faster than in other regions. We expect unemployment rates to drift lower as employment mildly improves and labour force growth stalls on the back of a standstill in population growth.
• Commodity producing provinces are still better positioned to weather trade-related headwinds. Production of key commodities in Alberta, BC, and Saskatchewan continues to trend higher as market demand has yet to wane. Some prices, particularly crude oil, have softened relative to our last forecast, but a broad-based mild recovery in commodity prices is expected through next year.

https://economics.td.com/provincial-economic-forecast