07:49 AM EDT, 03/24/2025 (MT Newswires) -- United States tariff risks continue to cloud the outlook for Canada, but January's gross domestic product report should show further signs of life in an economy that broadly underperformed global peers in the previous two years, said RBC.

Canada will release GDP data for January on Friday.

The bank expects GDP increased 0.2% month over month from December -- adding to the 0.2% month-over-month increase in December and slightly lower than Statistics Canada's preliminary estimate a month ago.

Output in the transportation sector likely bounced back after the end of the labor disruptions in postal service and ports that weighed on output in earlier months, stated RBC. Non-conventional oil production in Alberta posted another solid 4% gain in January by the bank's count, following a 2% increase last month, and drilling activity picked up after declining in November and December. Wholesale sale volumes also posted a 0.8% increase.

Outside of these sectors, the bank sees the report will be more mixed. Retail sale volumes declined by 1.1% month over month in January and home resales declined by 3.3%, building on a 5% drop in the prior month. RBC also expects manufacturing output will be little changed following declines in the previous two months. Still, the increase in overall GDP the bank estimates would outpace population growth for a second consecutive month and come alongside employment growth and a lower unemployment rate in 2025.

Moving forward, these more positive but, ultimately, backward-looking data releases will continue to be overshadowed by intensifying international trade risks. By RBC's count, the effective U.S. tariff rate on imports from Canada has increased by about 2 to 2.5 percentage points provided Canadian exporters are largely able to comply with CUSMA/USMCA rules.

But details of another round of planned U.S. tariffs in April are still vague. The bank continued to expect the implementation of tariffs and the threat of more to come will weigh on consumer and business confidence and spending in the months ahead.