09:25 AM EDT, 03/31/2025 (MT Newswires) -- The Canadian economy showed some panache in advance of the tariff war with the United States, which is one reason why the Bank of Canada contemplated moving to the sidelines at the last policy meeting, said Rosenberg Research.

The monthly real gross domestic product data on Friday showed a decent 0.4% month-over-month increase in January, while the consensus was for 0.3%, and Rosenberg Research saw December revised up a notch to 0.3% from 0.2%.

This helped the year-over-year trend garner a 2.2% pace -- two-year high -- which is being roughly matched by the quarter-over-quarter expansion, even though the Statistics Canada "flash" estimate is predicting a flat February.

There can be no doubt that there was some front-running ahead of the U.S. tariffs as the goods sector posted an outsized 1.2% month-over-month run-up -- services practically stagnated (+0.1%).

In any event, Friday's data is really for the historical record because Rosenberg has a good feeling that Q2 real GDP is going to end up contracting sharply -- at least at a 3% annual rate. A storm is coming to the Canadian economy, and the Canadian dollar (CAD or loonie) is a strong sell. The loonie touched C$1.48 on the initial tariff scare, and now the tariff war has become a reality.

Given the skew from the tariff front-running, the real story for the Canadian economy resided in the services sector, which wasn't distorted, stated Rosenberg. It unmasked what is still a soft economic underbelly. Real estate services dipped 0.1% month over month and that followed on the heels of a 0.2% setback in December.

Volume activity in the retail sector suffered a 0.9% hangover after the GST-holiday spending spree to close out last year. Air travel suffered its worst month (-2.6%) in three years. Recreation services also pulled back 0.4% in the first retreat since last September.