Deloitte added that outlook is improving, in part due to expectations that the Bank of Canada will cut its policy interest rate to 2.25% by year-end
Canada’s economy appeared to be teetering on the edge of a technical recession earlier this year, but a new forecast from Deloitte Canada has painted a more optimistic picture for the months ahead.
The advisory firm’s fall outlook projected that the country will avoid two consecutive quarters of economic contraction—a technical recession—thanks to anticipated growth in the third and fourth quarters of 2025.
Deloitte said the Canadian economy is expected to grow at an annualized rate of 1.2% in the third quarter, followed by 1.5% in the final quarter of the year.
Real GDP fell 1.6% on an annualized basis in the second quarter, based on data from Statistics Canada.
Similarly, TD Bank’s Maria Solovieva said July’s numbers helped steady the economy. GDP grew by 0.2% in July, ending three months of no growth. She added that August’s early estimate showed no change, but if September also holds steady, Canada will likely avoid a technical recession.
Despite the positive forecast, the report highlighted that sector-specific tariffs imposed by the US continue to weigh on Canada’s manufacturing industries.
Still, the country’s relatively low average US tariffs compared to other nations have helped minimize the damage.
Meanwhile, the federal government quietly dropped more counter-tariffs on US goods than first announced. An online order-in-council showed that, last month, all Canadian retaliatory tariffs were removed except those on steel, aluminum, and autos.
This move seems to contradict Prime Minister Mark Carney’s earlier promise to lift tariffs only on US goods covered by the Canada-US-Mexico Agreement (CUSMA).
Interest rate relief on the horizon
Deloitte added that outlook is improving, in part due to expectations that the Bank of Canada will cut its policy interest rate to 2.25% by year-end.
The prospect of rate cuts is likely to be welcomed by mortgage brokers and lenders who have seen deal flow slow in recent quarters.
Avoiding a technical recession could also help stabilize home prices and support a gradual recovery in housing demand. For mortgage professionals, this means a market that’s less volatile and more predictable—conditions that foster client trust and long-term planning.
However, with growth expected to remain modest, competition for business will likely stay fierce.
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