📉 Economic Downturn Looms
The CFIB projects Canada’s GDP will shrink by 0.8% in both Q2 and Q3 of 2025, marking the sharpest slowdown since the pandemic recovery. The downturn is being fueled by:
- Plunging private investment: Forecasted to fall 13% in Q2 and another 6.9% in Q3
- Weak manufacturing output: Trade tensions and tariff threats are hitting exports hard
- Persistently low business confidence: Companies are delaying or cancelling expansion plans
Simon Gaudreault, CFIB’s chief economist, warned that uncertainty from ongoing trade disputes is “driving low business confidence, translating into paused or cancelled investments. As trade tensions drag on, more businesses will be adjusting to tariff threats and finding alternatives.”
🚛 Supply Chain Pressures Mount
Since March, more Canadian businesses—especially in wholesale and manufacturing—are reporting significant supply chain disruptions, adding further pressure on economic growth.
💼 Consumers & Businesses Pull Back
Recent Bank of Canada (BoC) surveys reveal deepening concern:
- Consumers: Households are cutting back on spending, shifting toward Canadian-made products and local travel. Younger Canadians fear rising job losses.
- Businesses: Sales outlooks are pessimistic, with most companies planning to freeze hiring and limit new investments for the next 12 months.
🏦 What’s Next for the Bank of Canada?
While inflation remains stable (1.9% in June) and core inflation near 3%, strong job gains (+83,000 in June) complicate policy decisions. With its benchmark interest rate at 2.75%, the BoC faces a tough call for its July 30 announcement—whether to hold rates or cut further to cushion the slowdown.
Governor Tiff Macklem recently admitted, “Uncertainty is bad for business… the longer tariffs last, the more they weigh on the Canadian economy.”
✅ Why This Matters
- A recession could impact mortgage rates, housing affordability, and investment opportunities.
- Businesses and investors need to prepare for slower growth and tighter credit conditions.
- Homeowners may see shifts in property values and refinancing options as the economy adjusts.
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