What’s Going on in the Canadian Economy Right Now?
While global headlines have been dominated by trade tensions and AI-driven markets, here at home, the Canadian economy has been walking a tightrope. After a 1.6% contraction in Q2, early forecasts now suggest Canada may narrowly avoid a recession, with modest growth of 0.8–1.7% expected for Q3 (Rana, 2025). Micro-exporters have helped cushion some of the trade blows, but business confidence remains cautious at best. The Bank of Canada has been clear, slower growth is expected, and while a recession may be avoided, it’s not going to be smooth sailings (Reuters, 2025).
TD Economics’ Provincial Economic Forecast outlines how Canada’s economic story is deeply regional. Manufacturing-heavy provinces like Ontario and Quebec are bearing the brunt of the trade war’s fallout, especially in auto and equipment production, while oil-exporting provinces like Alberta and Saskatchewan are seeing relative resilience (TD Economics, 2025). Nova Scotia and New Brunswick, meanwhile, are battling poor business sentiment, with no short-term relief in sight. For B.C., the story is mixed, while export challenges persist, tourism and population growth continue to provide some cushion.
The Organisation for Economic Co-operation and Development (OECD) now project global growth to slow from 3.3% in 2024 to 3.2% in 2025, and to 2.9% by 2026, as early inventory buffers wear off and trade uncertainty begins to dampen business investment and consumer demand. GDP is expected to fall to 1.8% in the U.S., 1.2% in the eurozone, and 4.9% in China for 2025. While inflation is cooling in most G20 nations, core inflation in advanced economies is expected to remain above 2.5% well into 2026. The OECD warns that high public debt, ongoing tariff escalation, and fiscal pressures are clouding the global economic outlook, and calls for renewed cooperation to stabilize trade and implement structural reforms (OECD, 2025).
In the U.S., investors are navigating mixed signals. The S&P 500 notched its fourth straight monthly gain in August, buoyed by strong AI earnings, including Nvidia’s 56% revenue growth (Evans & Conlon, 2025). Yet inflation data and tariff concerns led to a late-month pullback, with companies like Caterpillar warning of up to $1.8 billion in tariff-related losses.
Central bank dynamics are also under pressure. With U.S. President Trump actively pressuring the Federal Reserve, even attempting to remove board members, Bank of Canada Governor Tiff Macklem raised alarms over the politicization of monetary policy and the weakening safe-haven appeal of the U.S. dollar (Reuters, 2025). Canada’s central bank remains committed to independence but warned that monetary policy alone can’t counter the efficiency costs of trade frictions.
Amid this backdrop, Canada’s trade-dependent economy is being challenged to adapt. Macklem emphasized the urgency of diversifying trade relationships and boosting domestic productivity, priorities that have long been discussed but now feel unavoidable (Reuters, 2025). With the U.S. stepping back from global trade norms and Canada bearing the brunt of shifting tariffs, structural change is becoming a necessity.
At the same time, households and investors are trying to read between the lines. Markets may be strong, but inflation remains a barrier, and wage growth is not keeping pace. With U.S. and Canadian interest rate cuts expected on the horizon, the remainder of 2025 will likely see continued volatility and unknowns.
What This Means for Your Financial Plan
We talk a lot about planning but eventually, you have to build. Fall is the time to stop procrastinating on your financial to-do list and start checking things off, before the busy holiday season. Open that RRSP. Book the tax consult. Make the estate planning call. Review the will you’ve been ignoring. These aren’t just admin tasks, they’re the real foundations of long-term financial confidence.
Whether you're a current client or someone looking to take the next step toward financial success, Alpen Investment Advisors is here to guide you every step of the way. Based in North Vancouver, our team, led by Jon Alpen, brings over 18 years of experience in helping clients grow, preserve, and navigate their wealth. With expert guidance, tailored solutions, and a steadfast commitment to your success, we are dedicated to supporting your unique financial journey.
Reach out to us today at jonathan@alpenia.ca to start or continue building your financial future with confidence and clarity.
References
Evans, B., & Conlon, S. (2025, August 29). Stocks close lower, but S&P 500 notches its 4th winning month in a row. CNBC. https://www.cnbc.com/2025/08/28/stock-market-today-live-updates-.html
Rana, U. (2025, September 23). Will Canada avoid a recession? Here’s what economists say . Global News. https://globalnews.ca/news/11446431/canada-avoid-recession-q3/
Reuter. (2025, September 23). Bank of Canada Head: Trump is raising questions about independence of US monetary policy. Reuters. https://www.reuters.com/world/americas/bank-canada-head-trump-is-raising-questions-about-independence-us-monetary-2025-09-23/
TD Economics. (2025, September 22). Provincial Economic Forecast. TD Canada Trust.
https://economics.td.com/provincial-economic-forecast
OECD. (2025, September 23). Global economic outlook weakens as policy uncertainty weighs on demand. OECD.
https://www.oecd.org/economic-outlook/september-2025
