Canada just posted two population records — its first annual decline since Confederation and its first consecutive quarterly decline — as demographics reset after the previous federal government in 2024 significantly cut the number of people it would allow into the country.

Canada’s population fell by 100,000 from a year ago, which was the first annual drop in population since the country was formed, due to shifting demographics and the country entering a period of contraction.

“Canada’s demographic engine is cooling rapidly, with broad implications for labour supply, housing demand and the economic outlook,” Kyle Dahms, an economist at National Bank of Canada, said in a report on Wednesday after Statistics Canada released the new numbers. “These quarterly dynamics are now reshaping the annual picture as well.”

The population drop in the fourth quarter followed a decline of about 80,000 in the third quarter and was primarily due to a “sharp reduction” in non-permanent residents, which fell by six per cent and are now down by nearly 500,000 since hitting a high in late 2024, he said.

Another factor was a negative birth rate. Permanent immigration provided the only offset to the decline, but was still 20 per cent lower than a year ago, Dahms said.

British Columbia, Ontario and Quebec all had declines in population, while Alberta was the only major province to record growth, which was due to an increase in people arriving from other provinces.

RBC Economics, earlier this month, reduced its growth forecasts for Ontario and Quebec, due in part to the weight of United States tariffs on their manufacturing sectors, but also because non-permanent residents account for a larger share of their populations.

“Immigration cuts have been swifter and more significant than we expected in some provinces, leading to outright annual population declines in Ontario and B.C. by the end of 2025,” the RBC team, led by chief economist Frances Donald, said in the report on March 12.

RBC now expects the Ontario and Quebec economies will each grow 0.9 per cent in 2026, down from a previous forecast of 1.1 per cent.

A declining population will also drag on B.C.’s economic growth, with RBC cutting its 2026 GDP forecast for the province to 1.1 per cent from 1.2 per cent.

The effect of Canada’s contracting population is being felt in the housing market, Robert Kavcic, senior economist and director of economics at BMO Capital Markets, said in a 2026 outlook report on the Canadian housing market. 

He predicted that new housing starts would slow alongside the population downturn. Housing starts in February were 250,900, below economists’ estimates for 255,000, according to Bloomberg data. 

National Bank warned in a separate report in February that in order to solve Canada’s

housing crisis

, construction cannot slow down. Otherwise, it could jeopardize improved

affordability

, which is the result of falling immigration and slowing demand.

Kavcic said the decline in population will especially be felt in the rental market as a glut of purpose-built apartments come online in tandem with the change in demographics.

“Rising vacancies and ebbing rents are still in their early days,” he said.

RBC said that it expects the declining population to add to the headwinds that the Canadian economy is facing this year, including a review of the Canada-U.S.-Mexico Agreement and “a more uncertain economic backdrop that keeps businesses cautious about making large new investments.”

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The Bank of Canada held its key overnight interest rate at 2.25 per cent Wednesday, as largely expected by economists, with the Middle East conflict and trade tensions driving economic uncertainty.

The decision to hold pat for now — the third pause in a row — was expected despite fears of rising inflation driven by soaring oil prices after the United States and Israel launched attacks on Iran. — Barbara Shecter, Financial Post

Read the full story here.

  • Today’s data: CFIB business barometer for March, Philadelphia Fed business outlook, U.S. initial and continuing jobless claims, U.S. new homes sales
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  • Bank of Canada in a ‘tough spot’ as higher oil prices, weakening economy pull it in opposing directions
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  • Katherina Reiche: A Canada-Germany vision for strategic sovereignty and building resilience together

Financial Post columnist Ted Rechtshaffen talks about airline trickery in his latest column as he recounts how a $4,000 voucher he accepted to give up his and his son’s seats on an overbooked flight to Mexico ended up convincing him that it never pays to do favours for an airline. Find out more

here

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McLister on mortgages

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Today’s Posthaste was written by Gigi Suhanic with additional reporting from Financial Post staff and Bloomberg.

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