Full Breakdown
Canadian Economic Growth Outlook Amid Global Uncertainties
4/2/2026, 8:03:51 PM
Current Economic Projections
Deloitte's spring economic outlook indicates that the Canadian economy is projected to grow by 1.2% in 2026, a decrease from the previous year's growth of 1.7%. Dawn Desjardins, Deloitte’s chief economist, highlighted that Canadian consumers and businesses are navigating a challenging environment characterized by rising energy prices due to ongoing conflicts in the Middle East and uncertainties surrounding North American trade. Desjardins noted, “We think the first half’s going to be the tougher half for Canada’s economy,” reflecting concerns over the potential for slower global growth linked to these international tensions.
Factors Influencing Economic Growth
The report identifies several factors that could impact Canada's economic trajectory. Labour market conditions are expected to stabilize, with the unemployment rate projected to decline to 6.3% by the end of 2026, despite a recent uptick to 6.7% in February. However, employment losses in the manufacturing sector are anticipated to continue, alongside challenges in educational services and public administration due to government spending cuts and a slowdown in international student arrivals.
Desjardins emphasized that consumer spending growth will likely remain modest as Canadians brace for sustained high energy prices and a softer job market. She stated, “There’s some risk to the inflation outlook,” indicating that rising energy costs could further constrain consumer and business spending.
Trade Relations and Government Initiatives
The outlook assumes that disruptions in the energy market will eventually stabilize and that Canada will maintain tariff-free access to most U.S. goods, contingent on the outcome of the U.S.-Mexico-Canada Agreement review. Desjardins warned of the risks posed by a potential breakdown in U.S.-Canada relations, which could significantly alter economic projections.
To bolster economic resilience, the Canadian government is focusing on infrastructure investments and national defense spending. In 2025, Canada allocated $63.4 billion to defense, meeting NATO's target of 2% of GDP for the first time. Desjardins noted that effective execution of government spending plans is crucial for supporting economic growth, stating, “if we don’t see spending dollars flow from governments... that’s going to be a significant risk to our economic outlook.”
Construction Sector Challenges
The construction sector is also facing headwinds, with housing starts expected to decline to approximately 243,000 units in 2026, down from 259,000 in 2025. Elevated construction costs, trade uncertainties, and rising inventories of unsold units are contributing to decreased builder confidence. Major markets like Toronto and Vancouver are experiencing a slowdown in condominium projects, as developers pause new launches amid falling presales.
Conclusion
Overall, Deloitte's economic outlook for Canada reflects a cautious approach to growth amid significant global uncertainties. The interplay of energy prices, trade relations, and government investment strategies will be critical in shaping the economic landscape over the coming years.
