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.
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.
BC STORIES
Abbotsford-Mission candidates clash on spending, taxes and trust ahead of byelection
Abbotsford-Mission candidates sparred over PST expansion, spending, and party stability during a livestamed byelection debate ahead of the Sept. 26 vote.

Candidates clash in livestreamed forum ahead of Sept. 26 vote
Tensions flared during a live 90-minute debate hosted by the Abbotsford Chamber of Commerce on Wednesday evening, where four Abbotsford-Mission candidates traded sharp criticisms over economic strategy, tax policies, and political stability.
NDP candidate Pam Alexis capped off the evening by targeting Conservative Party of BC candidate Kerry-Lynne Findley, claiming Findley is unfamiliar with the constituency and is focused on internal party conflicts rather than building a collaborative community. Findley had earlier criticized the ruling NDP on provincial spending, red tape, and an inability to balance B.C.’s budget.
Taxation and economic platforms take center stage
A primary point of contention was the expansion of B.C.’s PST to professional services starting Oct. 1. Findley voiced strong opposition, stating that local small business owners and seniors are distressed over growing tax burdens. She attributed the province’s rising debt and credit downgrade to Premier David Eby’s administration.
Alexis defended the expanded tax base, explaining it was necessary to maintain public services following the elimination of B.C.’s carbon tax. She assured voters that revenue raised would be managed responsibly.
During a candidate-to-candidate questioning period, Alexis pressed Findley on recent Conservative party instability, pointing to nine individuals—including Abbotsford South MLA Bruce Banman—who recently departed the party. Findley rejected the characterization that those individuals worked alongside her, attributing the exits to a competitive leadership race.
CentreBC candidate Lakhwinder Jhaj asked Alexis whether she would ever vote against an NDP budget, to which Alexis replied she would voice concerns privately within government rather than vote against her party. Findley seized on the response, advocating for greater public transparency. BC Green Party candidate Stephen Fowler urged more proactive environmental action, stating climate change drives costly flood and wildfire emergencies.
Common ground on infrastructure and flood mitigation
Despite sharp exchanges, candidates found consensus on several local issues. All four agreed that federal assistance is crucial to protect the riding from future flooding, and all supported expanding transit options to alleviate persistent highway congestion.
Additionally, both Findley and Alexis favored expanding mental health resources, supporting local food processing on Agricultural Land Reserve property, and opening inter-provincial trade barriers to bolster B.C.’s economy.
The byelection, scheduled for Saturday, Sept. 26, was triggered after former Conservative MLA Reann Gasper resigned her seat on Aug. 22 to allow Findley to seek the nomination following Findley’s move to party leadership. The debate was moderated by University of the Fraser Valley professor Hamish Telford. BC Libertarian Party candidate Jeff Monds did not participate.
NATIONAL STORIES
Why Conservative Leader Pierre Poilievre Is Taking Canada’s Case Directly to American Viewers
Pierre Poilievre told CNBC in New York that Canadians feel wounded by U.S. tariffs, while refusing to criticize Prime Minister Mark Carney on foreign soil.

Cross-Border Economic Advocacy in New York
During a visit to New York aimed at restoring standard trade relations, Conservative Leader Pierre Poilievre spoke with reporters on the American television network CNBC on Thursday. Poilievre expressed that Canadians are feeling “wounded” and “confused” after their economy became a primary target for U.S. President Donald Trump.
Highlighting the longstanding economic ties between the two nations, Poilievre stressed that tariff-free trade remains the proper path forward. While acknowledging that both countries have past grievances—pointing to previous American buy-America restrictions on subnational markets and tariffs on Canadian softwood lumber—he argued that both sides should sit down to resolve differences for mutual economic gain.
Refusing to Engage in Domestic Politics Abroad
When co-host Joe Kernen questioned him regarding Prime Minister Mark Carney’s good faith during recent trade negotiations, Poilievre declined to criticize the prime minister while outside the country. Emphasizing that domestic politics stops at the border, he stated that his mission in the U.S. was to advocate for Canada rather than score domestic political points. Co-host Kernen noted respect for Poilievre’s stance, observing that U.S. opposition politicians do not typically adhere to that convention.
Poilievre also refrained from faulting Canada’s national economic performance over the past decade when pressed by Kernen, choosing instead to highlight past policy successes across various government levels.
Building a North American Alliance
In a statement regarding his trip, Poilievre detailed plans to meet with business leaders and investors to protect jobs on both sides of the border. He described the American public as Canada’s greatest asset, noting his intention to make the case directly to them that open trade leads to greater safety, wealth, and affordability for both nations.
Looking toward broader global challenges, the Conservative leader cautioned that risks and rivals facing the U.S. are growing. He urged the United States to strengthen its Western alliance alongside nations committed to free speech, markets, and trade to form a secure continent through collaborative effort, rather than engaging in disputes with friendly allies.
Poilievre is extending his stay in New York through Friday for the 25th anniversary of 9/11 to honor victims and mark how both nations stood united following the attacks.
BC STORIES
Canada Choice: Pay the Price of Pivoting or Risk Economic Dependency on the U.S.
PM Mark Carney addresses Canadians as reciprocal tariffs take effect, warning trade pivot carries costs but protects B.C. and national workers.

Reciprocal Tariffs Take Effect
As Canada’s new reciprocal tariffs took effect on Tuesday, Prime Minister Mark Carney addressed Canadians in a video message, warning that shifting trade away from the United States will carry financial consequences. However, Carney emphasized that inaction would carry a significantly higher price for the nation.
The federal government’s tariffs match $27.8 billion in U.S. exports, with rates running between 15 and 50 per cent on select items previously targeted by Washington, including milk, cheese, honey, and hockey sticks. The move follows last month’s decision by Carney to walk away from bilateral negotiations after the U.S. set a deadline to impose 50 per cent tariffs on Canadian goods.
National Strategy and Sectoral Impacts
The trade friction has affected Canadian industries unevenly. U.S. trade actions have focused heavily on aluminum, steel, auto, and lumber sectors, creating major impacts for workers in British Columbia, Ontario, and Quebec, while provinces like Saskatchewan and Alberta have seen less direct effect.
Carney stated that the retaliatory measures are necessary to shield workers, communities, and businesses rather than to escalate tensions. The prime minister added that the pivot toward new global trade partners aims to build long-term economic resilience and safeguard Canada’s trade independence and cultural protections.
Opposition Calls for Transparency
Conservative Leader Pierre Poilievre, speaking in Regina on Sunday, urged the government to release full details of the rejected U.S. trade proposal. Poilievre argued that Canadians deserve complete transparency regarding the negotiations and called for Parliament to be recalled ahead of its planned Sept. 21 return date.
The trade dispute follows months of economic pressure, during which U.S. President Donald Trump suggested using economic force regarding Canada’s integration with the United States. Carney noted that the ongoing series of national video updates, which began last spring, will continue to keep the public informed on Canada’s trade stance.
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