What’s going on here?
Canada’s economy is limping toward the end of summer, with Scotiabank expecting August’s GDP to contract slightly and little sign of a turnaround in September—Friday’s data should confirm the trend.
What does this mean?
Scotiabank’s analysts are betting that Friday’s GDP figures will show Canada’s economic momentum fading at summer’s close. While early estimates pointed to a fragile August, sharper details now reveal a 0.1% dip—retail and wholesale gains are being outweighed by declines in manufacturing, mining, and transport. September doesn’t look much sunnier, either: with hours worked down 0.2% and both retail and home sales dragging, only stronger vehicle sales bucked the gloom. Overall, the bank expects annualized growth of just 0.75% for the third quarter, following a negative second quarter, signaling Canada’s economy is operating with more slack and less punch than usual.
Why should I care?
For markets: Investors weigh sluggish momentum.
Soft economic data could make the Bank of Canada think twice about more rate hikes. That means both stocks and bonds might stay reactive as investors look for direction—subdued GDP usually sets the stage for muted consumer spending and puts a cap on hopes for strong corporate earnings this fall.
The bigger picture: A cooler climate for policy decisions.
Canada’s cooling economy could force policymakers to reconsider their stance, especially as sectors like manufacturing and natural resources lose ground. If weak growth persists, talk may shift toward easing monetary policy or boosting public investment. Global investors will be watching if Canada’s slowdown endures—especially with mixed signals coming from other major economies.
