The Canadian economy proved more resilient than feared earlier this year.
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economy → prove → ?
Now, while many hope domestic infrastructure and investment projects will help the economy grow and boost its export diversification, the country is likely facing a period of slower growth in the short term.
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country → hope → term
That’s why Deloitte Canada recently raised its forecast for this year but cut next year’s growth forecast from 2 to 1.6 per cent, a figure that accounts for Canada’s retaliatory tariffs but not the Sept. 15 expansion or the Sept. 29 import bans.
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that → ’ → tariffs
To better understand where the economy has proven most resilient, and where future challenges lie, National Post reached out to Deloitte Canada’s Chief Economist Dawn Desjardins for some insights.
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Post → understand → insights
This Q&A has been edited and condensed for clarity and length.
Deloitte Canada raised its forecast for this year but cut next year’s.
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Canada → edit → year
What has kept Canada’s economy afloat so far, and why do you expect that resilience to weaken?
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resilience → keep → economy
In the second quarter, Canada’s economy really did grow very strongly, and it was pretty broad-based, which I thought was interesting.
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I → grow → quarter
It wasn’t just the consumer, but it was also the housing market, and we saw business investment pick up.
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investment → see → ?
Exports also picked up.
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Exports → pick → ?
Now, as we are monitoring the third quarter, there is still growth, not nearly as rapid, but still seeing signs of growth.
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we → monitor → growth
That’s all to describe how we netted out to get a stronger growth rate for 2026.
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we → ’ → 2026
It really was that lift from the second quarter and the fact that the first quarter, which had initially been indicated to have contracted, actually was positive.
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which → indicate → quarter
So that kind of set the benchmark, and we did end up seeing our forecast being upgraded.
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forecast → set → benchmark
But for 2027, all the events of recent weeks and months certainly suggest that it’s having an impact on Canadian business confidence, Canadian consumer confidence, and we think very likely we will see slowing export activity as we go through the course of 2027.
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we → suggest → 2027
So those factors taken together, it does suggest that we’re in for a period of slower growth in 2027 compared to what we previously thought.
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we → take → what
Previously, we thought 2 per cent.
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we → think → cent
Why hasn’t the full effect of the latest tariffs arrived yet?
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effect → arrive → tariffs
How does a tariff imposed today translate into weaker growth tomorrow?
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tariff → impose → growth
I think what we’ve seen is that, especially in the most recent data we have, which was for the month of August, we saw actually some strong export activity as exporters tried to sell into the U.S. quicker than they otherwise would have.
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they → think → U.S.
So they were kind of front-running those tariffs.
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they → run → tariffs
Now, as we go forward, of course, they are in place.
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they → go → place
And so we will see, we think, softer demand for some of Canadian goods sales into the United States, and that’s what’s going to weigh overall on our exports.
When you talk about exports slowing in 2027, are you referring specifically to the U.S. market?
We don’t actually have them falling.
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them → see → market
We just have them going very, very, very slowly.
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them → have → ?
They will be negative, we think, in the next few quarters, but then start to pick up again as supply chains are rearranged, as Canadian companies look for other markets to sell to.
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companies → think → markets
So a lot of it is, in fact, reflecting weaker demand we expect from the U.S. market.
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we → reflect → market
What will the next phase feel like for Canadians?
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feel → feel → Canadians
Will they see higher prices, fewer jobs, smaller pay increases, layoffs, or business closings?
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they → see → prices
I think we have seen already in August a decline in jobs.
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we → think → jobs
It’s likely going to remain a rough outlook for people who are looking for jobs, especially until we get to a period of time where we’re starting to see more business investment pick up.
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investment → go → time
So right now, I think the fact that we are seeing such a weight on business confidence, businesses today are obviously very concerned about where demand is going to come from.
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demand → think → where
And so right now, I feel like they’re in that kind of perhaps low-hire, low-fire type of environment.
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they → feel → environment
By that, I mean not necessarily looking to expand, but given that we’re seeing such weak immigration growth, probably looking to maybe retain some of the workers.
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we → mean → workers
And so you don’t see a lot of movement, I don’t think, in the labour market in the medium term, immediate term.
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I → see → term
But as we move forward, we do think that we’re going to start to see hiring pick up pace.
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hiring → move → pace
And this is going to reflect changes that we’re anticipating to come, whether it’s from public infrastructure investments, so by the public sector, or starting to see some private-sector money move into accompanying some of the investments that we’re seeing put in place by the federal and provincial government.
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we → go → government
Right now, what we’re seeing is that our inflation rate is being largely driven by energy prices.
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rate → see → prices
So, we have an inflation rate of three per cent right now, at the upper end of the Bank of Canada’s target band.
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we → have → band
And when you look below that, prices are rising at a slower clip.
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prices → look → clip
If you exclude energy, I think it’s about 2.4 per cent.
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it → exclude → energy
Now, as we move forward, it’s going to depend on how long tariffs stay in place, if companies are going to absorb some of it or … And this is more the retaliatory tariffs on Canadian goods coming into the country.
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this → move → country
…and 99 more, not listed.
The Aporia
