Canadian Economy on Brink of Recession as Interest Rates Weigh on Growth

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The Canadian economy has flatlined in recent months as higher interest rates weigh on growth, bringing the country to the brink of a mild recession.

Real gross domestic product was essentially unchanged in September, according to a preliminary estimate that Statistics Canada published on Tuesday. While the numbers will be revised on Nov. 30, GDP is on track to fall by 0.1 per cent annualized in the third quarter, following a 0.2-per-cent drop in the second quarter.

But as economic activity wanes, analysts are Bay Street are increasingly convinced that the central bank is finished with its rate-hike campaign. Mining, oil and gas extraction jumped by 1.2 per cent in August, although this was partially a recovery from the disruption of forest fires earlier in the year. Manufacturing fell for a third consecutive month, while the hospitality sector slid by 1.8 per cent, with particular weakness at restaurants and bars.

Mr. Macklem said you can’t rule out “some small negative numbers” in the near future – although this wouldn’t necessarily qualify as a recession. The annual inflation rate has fallen to 3.8 per cent from a peak of 8.1 per cent last summer. Despite that progress, the Bank of Canada has warned of various risks to the outlook, including volatile oil prices and sharp increases in housing costs, owing to a supply shortage.cutting interest rates before inflation returns to its 2-per-cent target. The central bank projects a return to target by mid-2025. Many analysts expect rate cuts to start sometime next year.

Source: Financial Digest (financialdigest.net)

Canada Economy Recession Interest Rates Growth

 

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