The Canadian economy is facing challenges due to the ongoing trade war with the United States, causing it to weaken. Despite this, recent signs suggest that Canada has managed to avoid a recession, as per Jeremy Kronick, co-chair of the C.D. Howe Institute’s Business Cycle Council.
Data on GDP to be released soon is expected to confirm this trend. The economy contracted by 1.6% in the second quarter of this year on an annualized basis. A recession is typically defined by back-to-back quarters of economic contraction.
Economists predict that the GDP numbers for July and a preliminary look at August will demonstrate growth. Desjardin’s deputy chief economist forecasts a modest growth range of 0.0%-0.5% annualized for the third quarter.
The slight growth is attributed to exemptions from U.S. tariffs on most Canadian exports. Following the initial setback in April, various sectors such as manufacturing sales, wholesale trade, and housing have shown signs of improvement.
Although the economy’s resilience has surpassed initial fears of a deep recession, uncertainties remain. The Bank of Canada’s recent interest rate cut and the government’s planned increase in spending indicate ongoing concerns despite the avoidance of a recession so far.
The impact of the trade war, particularly in trade-exposed regions like Windsor, Ontario, has led to challenges such as rising unemployment rates. Consumer and business confidence remains low, highlighting the ongoing economic struggles.
While employment indicators are crucial, the unemployment rate has risen from 5% in 2022 to 7.1% currently. However, experts believe that the situation may stabilize without further deterioration.
Although the current data shows positive signs, economists remain cautious about declaring complete success in avoiding a recession. Encouraging forecasts suggest a gradual economic recovery and improved conditions in growth, employment, and exports by 2026.