04:19 PM EDT, 04/30/2025 (MT Newswires) -- The Toronto Stock Exchange closed lower on Wednesday as data showed the Canadian economy performed 'below potential" in the first quarter and is expected to weaken further in the second and third quarters, which is seen pushing the Bank of Canada to resume its rate-cutting cycle in June.

The S&P/TSX Composite Index closed down 32.8 points at 24,841.68, only the third losing session in the last 13. Among sectors, the biggest decliners were Base Metals and Energy, down 3.15% and 2.30%, respectively, followed by Technology, down 1.78%. Telecoms and Utilities were higher, up 1.40% and 0.99%, respectively.

Veteran economist David Rosenberg noted Mark Carney was today greeted with his first major economic release since taking his Liberal Party to its fourth-straight election win earlier this week. Statistics Canada released February real GDP and instead of coming in flat, it showed the Canadian economy contracted 0.2% month over month. Rosenberg also noted Statistics Canada estimates that there was very little recovery in March, seeing a "flattish" 0.1% uptick. He said: "It looks as though real GDP growth in Q1 expanded at around a +1.6% annual rate, which may not be a technical recession but is still a pace that is below potential, which means a widening output gap. This poses downside risks to inflation, which will come as a surprise to a more recently cautious Bank of Canada."

Rosenberg noted the weakness in the economy in February was broadly based with both the goods sector and service providers in contraction mode. "From our lens," he added, "the fact that the areas of GDP most sensitive to monetary policy deteriorated as much as they did -- construction (-0.5%), real estate (-0.4%), and retail activity (-0.2%) -- is a signal that the BoC's work is not entirely done."

National Bank economist Kyle Dahms noted the Canadian economy was weaker than expected in February, declining by 0.25%, its worst performance in 26 months as a majority of sectors worsened during the month.

Looking ahead, Dahms noted the preliminary estimate for March suggests growth could have edged up by one tick. Taking that into account, on a quarterly basis, industry growth could have registered at 1.5% annualized in the first quarter of the year following a 1.8% increase in the last quarter of 2024. But, Dahms said, "This decent start to the year is unlikely to be propagated for the remainder as uncertainty continues to reign. Unless tensions with our southern neighbour are significantly reduced, we continue to believe that consumer and business confidence will remain very low. As such, this scenario should translate into lower outlays and reduced investment. Moreover, the potential damage to the labour market is palpable and may have already started according to the March LFS report. All told, our view remains that we expect a weakening of the economy in the second and third quarters."

Desjardins noted the Bank of Canada released its 'Summary of Deliberations', detailing deliberations by the Governing Council for the policy decision made two weeks earlier. Desjardins continues to believe the BoC will resume its rate cutting cycle in June, with the debate potentially being about whether to cut 25 or 50 basis points. According to Royce Mendes, Desjardins Head of Macro Strategy, today's "soft" GDP numbers suggest the economy was already losing momentum ahead of the worst of the tariff shock to date.

West Texas Intermediate (WTI) crude oil fell to the lowest in more than four years on Wednesday as the U.S. economy weakened in the first quarter, slowing demand, while a report said Saudi Arabia is prepared to weather lower prices and raise production. WTI crude oil for June delivery closed down US$2.21 to settle at US$58.21 per barrel, the lowest since February, 2021, while June Brent crude was last seen down US$1.12 to US$63.13.

Gold traded lower for a second day late afternoon on Wednesday as the dollar rose after the United States reported its economy slowed in the first quarter. Gold for June delivery was last seen down $30.30 to US$3,303.30 per ounce.