Recession looming, says economist in dire warning about Canada outlook
Canada’s economy had already been slowing when the Bank of Canada pivoted from a 5% policy rate in 2024 to aggressive cuts. Despite that shift, one high‑profile economist believes the country has slipped into a clear recession watch, with little to show so far for 275 basis points of easing.
In a new Rosenberg Research report, Canadian Economy on Life Support, chief economist David Rosenberg pointed to falling per‑capita GDP, annual growth of roughly 1% and weakness in housing and manufacturing. Home prices were down about 2% year over year and manufacturing output fell around 5%, according to the study.
“It’s clear to me, unless the policy lags are just a lot longer this time around, that this is what 275 basis points of bank Canada rate cuts delivers: the grand total of one per cent growth economy,” Rosenberg told BNN Bloomberg. “The next question is, is that all you get?”
The economy is projected by the report to contract at an annualized 0.5% in the fourth quarter, weaker than the Bank of Canada’s flat‑growth forecast. Rosenberg argued that two contractions in the past three quarters were sounding clear alarm bells about a recession.
“Inflation in this country is not really an issue. Virtually every underlying inflation measure is comforted within the Bank of Canada’s comfort zone,” Rosenberg said.
In recent months, Deloitte Canada lowered its 2026 GDP forecast to 1.5% from 1.7%, pointing to soft investment, weaker population growth and a still‑uncertain global backdrop.
For housing – and by extension, mortgage volumes – the message is equally stark. “If you look over the past year, residential construction expenditures are flat as a beaver tail,” Rosenberg said, adding that expectations of renewed housing inflation after rate cuts had not materialized.
“Home prices in Canada nationwide have either been flat or negative sequentially for 10 months in a row, and are running negative two per cent year-over-year,” Rosenberg said.
Other analysts also question how much relief the current rate path would bring. TD Economics and the Conference Board of Canada previously said that more cuts could be needed to meaningfully revive mortgage activity, even as past moves merely kept the housing market from a deeper downturn.
The Canadian Mortgage Brokers Association of Ontario (CMBA Ontario) recently warned that the Bank’s January rate hold risks further entrenching a status quo slowdown in sales and construction.
“We were looking for the Bank of Canada to take a more active role on this,” said Michelle Campbell, president of CMBA Ontario.
“A rate cut would have been a clear indicator for all those concerned that the future of the housing market in Canada will be healthy, regardless of what is happening elsewhere.”
Make sure to get all the latest news to your inbox on Canada’s mortgage and housing markets by signing up for our free daily newsletter here.
