In a new report, Fitch Ratings downgraded its outlook for Canadian economic growth this year. Trade tensions with the US, which have sent consumer and business confidence plummeting, could weigh heavily on Canadian economic activity. Canada has already seen a pullback in consumer and business spending this year amid much economic uncertainty after the US placed tariffs on Canada. This has also resulted in a slowdown in Canada’s labour market, adding to the worries of households.

• Fitch now sees the Canadian economy growing by just 0.1% this year. The ratings agency expects growth to pick up slightly to 0.5% in 2026. Fitch believes the Canadian economy could see a recession this year.
• Fitch believes the significant drop in consumer and business confidence is pointing to the likelihood of a recession this year. In response, spending and investment have pulled back.
• The ratings agency pointed to the CFIB Business Barometer Index, which fell to its lowest level ever recorded in March. A challenging sales environment raises questions about Canada’s labour market. The unemployment rate has risen to 6.9% this year. Job growth has been muted in 2025.
• Statistics Canada will announce Canada’s gross domestic product growth for the first quarter on May 30. The economy grew by 2.6%, annualized, in the fourth quarter of 2024. This is expected to slow in the first quarter.

The drop in consumer and business confidence isn’t a surprise given the uncertainty brought on by the fractured Canada-US relationship, particularly as it relates to trade. Recent data shows a slowdown in economic conditions. Fitch Ratings is also seeing the challenges facing Canada’s economy. However, Canada has been here before. The economy, much like financial markets, ebbs and flows over time. The one constant is that Canada’s economy has proven its resiliency over the long term.

If you would like to discuss this economic and market update or have questions about your finances and investments, please feel free to contact me anytime.