Has Canada Avoided a Recession? New GDP Figures Offer Early Clues
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Canada’s economy has been under pressure for months due to ongoing trade tensions with the United States. However, early indicators suggest the country may have narrowly avoided a full-blown recession.
GDP Data Shows Modest Growth
Economists point out that while the economy is struggling, the recent contraction does not meet the technical definition of a recession. A recession is generally defined as two consecutive quarters of negative GDP growth.
GDP figures set to be released this Friday will cover July and provide a preliminary estimate for August, giving insight into the third quarter. Analysts currently expect modest growth in these months.
“We’re projecting third-quarter GDP growth between 0.0% and 0.5% annualized,” said Randall Bartlett, deputy chief economist at Desjardins.
Factors Supporting Recovery
The small rebound comes largely from exemptions from U.S. tariffs, leaving most Canadian exports tariff-free. Key sectors such as manufacturing, wholesale trade, vehicle production, and housing have all shown improvement over the summer.
Despite these signs, CIBC’s chief economist Avery Shenfeld warns that Canada has only avoided a recession “so far.” He stresses that whether the recovery continues through the end of the year will be crucial.
Government and Central Bank Measures
Recent policy actions reflect ongoing economic vulnerabilities. The Bank of Canada recently cut interest rates, and the federal government is planning additional spending measures. These moves are aimed at supporting growth but also signal that the economy is not fully stable.
Certain regions, especially those reliant on trade, continue to feel the impact. For example, unemployment in Windsor, Ontario, has climbed to 11%, highlighting regional disparities in economic recovery.
Employment Remains Key
Employment is a critical measure of economic health. Canada’s unemployment rate rose from 5% in 2022 to 7.1% today. Economists expect it to stabilize, which provides a glimmer of hope for broader economic recovery.
“Stopping the decline is the first step; real improvement takes time,” says Nathan Janzen, assistant chief economist at RBC.
Outlook for 2025 and Beyond
While it’s too early to declare victory, the data suggest that Canada may escape a recession. Analysts remain cautiously optimistic that steady growth in exports, employment, and consumer activity could strengthen the economy over the remainder of 2025, with a more substantial rebound potentially emerging in 2026.
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