POLITICS

Stalling Growth: Canada’s Economy Shrinks at End of 2025 as Rate Cut Pressure Mounts

Canada’s GDP shrank at the end of 2025 as businesses cut inventories. Discover how this impacts the Bank of Canada’s rate cut timeline and 2026 growth.

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7 months ago

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The 2025 Economic Cold Snap

The Canadian economy experienced a sharper-than-expected cooling at the end of 2025, leaving policymakers and investors scrambling to recalibrate their expectations for the coming year. Data released today reveals that the national Gross Domestic Product (GDP) contracted during the final quarter, a move largely attributed to a significant reduction in business inventories. This trend of “destocking”—where companies sell off existing goods rather than producing or importing new ones—acted as a significant drag on economic output, offsetting gains in other sectors.

Understanding the Inventory Impact

Economists point to the inventory drawdown as a sign of business caution. After several years of supply chain volatility, many firms had built up substantial cushions of stock. As consumer demand softened throughout the latter half of 2025, businesses prioritized clearing these backlogs to improve cash flow and reduce carrying costs in a high-interest-rate environment. While this process is technically a subtraction from GDP, some analysts view it as a necessary correction that sets the stage for future growth when restocking eventually resumes. However, the immediate impact has been a cooling of the headline growth figures that far exceeded analysts’ initial fears.

The Bank of Canada’s Policy Dilemma

The latest figures place the Bank of Canada (BoC) in a delicate position. For months, the central bank has maintained a holding pattern, waiting for clear evidence that inflation is sustainably returning to its two percent target. However, the current growth trajectory for the first quarter of 2026 is trending at approximately 1.0 percent, significantly underperforming the BoC’s own forecast of 1.8 percent. This underperformance suggests that the economy is cooling more rapidly than anticipated, potentially opening the door for rate cuts sooner than the mid-2026 consensus previously held by many market participants.

Expert Perspectives on Growth and Rates

Andrew Grantham, a senior economist at CIBC, noted that while today’s data might not be enough to move the central bank immediately, the outlook is shifting. Grantham highlighted that any negative trends in the job market, which has so far remained relatively resilient, would be the likely catalyst for a change in the BoC’s thinking. Similarly, Douglas Porter, chief economist at BMO, described the current growth as “mild” at best, suggesting that while the door to rate cuts is “slightly ajar,” the central bank is not quite ready to walk through it just yet. The cautious tone from the BoC reflects a fear of cutting too early and reigniting inflationary pressures, particularly in the housing market.

Silver Linings in the Revision Data

Despite the weak finish to 2025, the report offered some positive news in the form of historical revisions. The GDP figures for the second quarter of 2025 were revised from a -1.8 percent contraction to a much shallower -0.9 percent. Dominique Lapointe, director of macro strategy at Manulife Investment Management, pointed out that these revisions mean the economy was actually on firmer footing heading into the second half of the year than previously understood. This revision effectively aligns the total size of the Canadian economy by year-end with earlier, more optimistic forecasts, despite the fourth-quarter stumble.

A Cautious Outlook for 2026

As Canadians look toward the remainder of 2026, the economic narrative remains one of caution. Consumers, squeezed by the lingering effects of high debt-servicing costs, have pulled back on discretionary spending. This was evident in the third-quarter data, which was also revised downward to 2.4 percent annualized growth from 2.6 percent. Economists described that period as a “mixed bag,” where growth was artificially supported by a drop in imports rather than a surge in domestic productivity. For the average Canadian household, the primary concern remains whether the current slowdown will translate into broader job losses or if the economy can achieve the elusive soft landing that the Bank of Canada has been aiming for.

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BC STORIES

Caucus Split Grows as Three More B.C. Conservative MLAs Depart Ahead of Potential Election

Three B.C. Conservative MLAs have departed the caucus, legislative officials confirm, as internal leadership disputes surface ahead of a potential provincial election.

Published

2 days ago

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September 18, 2026

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Legislature Office Confirms Caucus Changes

The office of the B.C. legislature clerk has verified that three additional MLAs have ended their affiliation with the B.C. Conservative Party caucus. Notification was submitted to the Office of the Speaker on Friday, Sept. 18, regarding Skeena MLA Claire Rattée, Nechako-Lakes MLA John Rustad, and Surrey-White Rock MLA Trevor Halford.

Following the legislative confirmation, B.C. Conservative Leader Kerry-Lynne Findlay released a public statement confirming the immediate removal of all three politicians from the caucus. Findlay framed the decision around preparations for a potential upcoming provincial election, stating the party must concentrate fully on challenging the ruling NDP government under Premier David Eby.

Rattée Challenges Removal and Cites Internal Scrutiny

In response to the announcement, Rattée issued a detailed statement on social media rejecting the attempt to remove her and confirming her intention to remain in her position. She argued that as an elected MLA, Findlay lacks the authority to strip caucus membership from elected team members.

Rattée pointed to a broader trend of internal caucus friction, noting that nine MLAs have departed the party since mid-August while raising concerns about leadership. Her statement highlighted accusations involving offers of paid positions in exchange for seat resignations, controversy surrounding senior staff, and reports that a senior party official engaged a private investigator to monitor current and former MLAs. Rattée confirmed she was informed by the party that she had been targeted in the investigation, calling the move a severe lapse in judgment on the eve of a potential snap election call.

Former Interim Leader and Colleagues Prepare Next Steps

Halford also shared a brief update on social media, reflecting on his previous tenure as interim leader during a period of party growth. He stated that he intends to run again in his riding of Surrey-White Rock if an election is called and indicated he would release further details shortly. Rustad noted on X that a formal press release would be issued soon.

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BC STORIES

Why B.C. Centrists Are Uniting Under Peter Milobar as Election Speculation Grows

Peter Milobar assumes leadership of Centre B.C. as eight sitting MLAs unify to present a centrist alternative ahead of a potential B.C. election.

Published

2 days ago

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September 18, 2026

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Political Consolidation Ahead of Potential Snap Election

In a move to prevent splitting votes among centrist options, eight sitting Members of the Legislative Assembly have unified under the Centre B.C. banner. Kamloops Centre MLA Peter Milobar announced Friday in Vancouver that he is assuming the leadership of the party, supported by outgoing leader Mike Bernier, a former B.C. Liberal cabinet minister who stepped down to facilitate the transition.

The caucus consolidation brings together former B.C. Conservative MLAs who left the party following disagreements with Leader Kerry-Lynne Findlay, alongside independent representatives. Milobar took the helm alongside Bernier and six other MLAs—Bruce Banman, Teresa Wat, Donegal Wilson, Á’a:líya Warbus, Rosalyn Bird, and Elenore Sturko. A eighth caucus member, Delta South MLA Ian Paton, was unable to attend the announcement due to a scheduled vacation but remains fully committed to the party, according to Milobar.

Focus Areas and Electoral Strategy

Addressing the party’s platform, Milobar stated that Centre B.C. will be “hyper-focused” on healthcare, climate action, and public safety on municipal streets. The party intends to field candidates across British Columbia if a provincial election is called. Bernier noted that discussions regarding the leadership transition and political alignment had been underway for several weeks, with public polling indicating that 51 per cent of British Columbians are seeking an alternative to the primary political parties.

Speculation Over Provincial Election Timing

The leadership shift comes amid growing speculation that Premier David Eby may trigger an early election less than two years into his current mandate. Political parties had originally envisioned an autumn launch on the steps of the legislature on Oct. 5 for the start of the fall session. However, shifting timelines have accelerated party preparations across the province.

An early provincial election call could overlap with municipal elections scheduled for Oct. 17. The potential timing has raised procedural concerns; Union of B.C. Municipalities president Cori Ramsay has requested the premier delay any provincial call, pointing out that an active provincial campaign alongside the ongoing Abbotsford-Mission byelection running until Sept. 26 would require Elections BC to halt administrative paperwork for other political entities seeking registration.

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BC STORIES

B.C. Conservative Leader Vows to Stay On as Snap Election Rumours Grow

B.C. Conservative Leader Kerry-Lynne Findlay says she will stay on despite nine caucus defections and growing speculation about an early provincial election.

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2 days ago

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September 17, 2026

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Findlay Vows to Remain Party Leader

British Columbia Conservative Leader Kerry-Lynne Findlay told delegates at the Union of British Columbia Municipalities convention in Vancouver that she plans to remain in her post despite recent internal strife. Addressing the audience on Thursday, she stated that she is “not going anywhere” as speculation grows surrounding a potential provincial election call.

Caucus Defections and Internal Strain

Since Findlay assumed leadership on May 30, 2026, nine members of the legislature have resigned from the Conservative caucus. Defectors have cited dissatisfaction with her leadership style, the party’s ideological direction, and internal division. Seven of the former members have banded together under interim leader Peter Milobar to establish a new party, which currently remains unregistered and unnamed due to provincial rules governing ongoing byelections.

Findlay acknowledged taking responsibility for the departure of caucus members while defending her record, pointing out that previous party leaders also faced resignations. She noted during a Wednesday caucus meeting that while several legislators called for her resignation, her team is focused on moving forward together.

Potential Snap Election Prep

The internal conflict coincides with warnings from Premier David Eby, who alerted both Elections BC and his NDP caucus to prepare for an early campaign. In response to the potential election call, the B.C. Conservatives initiated an emergency 48-hour fundraising campaign to secure funds for voter messaging and volunteer efforts.

Findlay, who is currently campaigning in the Sept. 26 Abbotsford-Mission byelection to win a seat in the legislature, outlined key platform positions during her speech. Her proposed measures include eliminating the planned expansion of the provincial sales tax to services and expanding mandatory compassionate care for mental health and addiction struggles.

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