Economists Predict Grim Q3 GDP Outlook for Canada

Economists expect Canada's third-quarter GDP to fall significantly below the Bank of Canada's 2.8% forecast, potentially reaching just 1%-1.5%. Constrained consumer spending and rising unemployment among immigrants contribute to the bleak outlook. The central bank might need to implement larger interest rate cuts to avoid a recession.

Canadian gross domestic product in the third quarter is expected to fall significantly below the Bank of Canada's forecast, possibly reaching less than half the estimate, as growth stagnates and joblessness continues to rise, economists stated this week.

In July, the BoC had forecast a 2.8% annualized GDP growth for the third quarter, supported by falling borrowing costs, booming exports, and increased household spending. However, recent data showing constrained consumer spending and employment challenges for immigrants have led economists to lower their growth expectations.

If these revised projections hold, the central bank might have to enforce larger interest rate cuts than previously anticipated to prevent the economy from sliding into a recession in the upcoming quarters, according to multiple economists interviewed by Reuters. "I think it's looking less likely that the Bank of Canada's Q3 projections are actually going to take hold," remarked Andrew DiCapua, a senior economist at the Canadian Chamber of Commerce.

(With inputs from agencies.)