Friday’s GDP numbers came in worse than expected, falling 0.1% and pushing Q1 annualized growth into negative territory…

… which marks the second down print in a row, putting the country firmly in recession territory. This quarter was dragged lower by trade activity…

… and fixed capital formation, a category that was a source of strength in recent quarters on the back of government defence spend.

Stripping out Ottawa’s piggy bank highlights the deeper issue, with business fixed capital formation falling for the fifth straight quarter…

… which has downstream implications for productivity, a key ingredient in offsetting the GDP impact of negative population growth. It also contributed to final domestic demand flipping negative in the quarter…

… despite a second sequential gain in household consumption driven by financial services and food, which doesn’t scream discretionary…

… and outpaced growth in disposable income, pushing the household savings rate to its lowest point in two years.

While ugly, preliminary GDP estimates for April are calling for a 0.4% resource-led gain - offering some hope that growth can come back.

The budgetary deficit was $30B in March, roughly $5B higher than last year - taking the fiscal year total to $55B (before final adjustments)…

… on a 1.6% rise in expenses (~$8B), tied mainly to higher transfers to persons (old age, EI, etc.) and to provinces (health, child care, etc.).

That outpaced revenue growth of 1.1% (~$5B), roughly $4B of which is attributable to tariff revenues that won’t repeat next year - potentially creating a tough Y/Y comp.

It didn’t take long for Scotia (BNS) to deliver on its Q2 earnings M&A guidance…

… with the bank taking aim at Dallas-based MapleMark, enabling it to offer FDIC insurance to clients of its mortgage capital markets business…

… which is ramping up south of the border. Should the bank be able to execute, the segment represents a capital-light growth lever that could help BNS close the valuation gap to its peer group.

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