Understanding Canada’s Economic Health
Canada’s economic health will be under scrutiny later this week with the release of key economic data from Statistics Canada. The data, scheduled for release on November 28, will include gross domestic product (GDP) reports for September and the third quarter of 2025.
Expected GDP Growth
The Bank of Canada and top financial institutions are projecting moderate GDP growth of 0.5 per cent. However, some economists believe this forecast may be overly optimistic and that the actual figures could be lower. The central bank defines a recession as two consecutive quarters of negative economic growth, measured by GDP.
Previous Economic Performance
In August, Canada reported a -1.6 per cent GDP decline during the second quarter of 2025, following a strong 2 per cent gain in the previous quarter. Economists attribute the decline to international trade disruptions, which have significantly impacted Canadian exports. If Canada’s GDP growth is negative for a second quarter in a row, it could indicate that the country is experiencing a recession.
What Constitutes a Recession?
According to economist Angelo Melino, the central bank’s two-quarter guideline is a general rule of thumb used to qualify a recession, but it isn’t always a definitive measurement. Melino explains that the duration and widespread nature of the decline are also important factors in determining whether the country is in a recession.
Economic Indicators
The C.D. Howe Institute’s Business Cycle Council proposes the start and end dates of recessions in Canada. The council looks at the average growth rate over two quarters before considering whether the country is in a recession. In 2025, the stronger growth in the first quarter compared to the second quarter means that the average growth rate for the first two quarters is positive.
Third Quarter Expectations
Canada’s GDP grew by 0.2 per cent in July, following three consecutive months of declines. It fell again in August by 0.3 per cent, offsetting the gains made the previous month. Economist Angelo Melino attributes the negative outcome to the Air Canada labour strike, which saw over 10,000 flight attendants walk off the job during the summer. The end of the strike is expected to result in slightly better GDP figures for September.
Challenges Facing the Economy
Canada’s economy has taken a significant hit over the last year, primarily due to U.S. President Donald Trump’s tariffs on major Canadian exports like autos, steel, aluminum, and lumber. Economist Don Drummond notes that the economy is "going sideways" due to the impact on exports, which account for around one quarter of the economy. Drummond also expresses concerns about the potential for weak investment and consumption.
Conclusion
The forthcoming Statistics Canada data is expected to provide insight into Canada’s economic outlook. However, the data will be missing international trade data due to the delayed release of information from the U.S. Census Bureau. Economists warn that this could lead to larger-than-normal revisions of GDP data in the future. As Canada waits for the release of the economic data, one thing is clear: the country’s economic health will be under close scrutiny in the coming weeks and months.
