A long-anticipated economic slowdown in Canada could be underway, according to a new report. 

RBC Economics released a report Wednesday indicating that Canada’s economy faces various headwinds in the form of elevated interest rates and a slowing global economy. The report noted that gross domestic product (GDP) moved 0.2 per cent lower in the second quarter of the year and early indications highlight the potential for another decline in the third quarter. 

The report found indications that a “long expected ‘mild’ economic downturn may have already begun.” 

“Indeed, economic growth already looks dramatically softer in the context of a surging population. On a per-person basis, Canadian GDP has now declined for four straight quarters,” the report said. 

Notably, the economists highlighted that the 0.5-per-cent increase in Canada’s unemployment rate over the past four months marks the largest increase, excluding the pandemic, since the 2008-2009 recession.

Since the 1970s, the report said there have only been six instances of jobless rates rising that much in a short period, four of which occurred during a recession. 

“Though employment growth has slowed, it was still up 19,000 per month over the last four months. But the number of job openings is drifting lower, signalling that labour demand is flagging,” the report said. 

Amid current economic conditions, the report said Bank of Canada officials have been highlighting the “one and only” policy directive of the central bank to keep inflation at two per cent. However, the report said price pressures in Canada remain “sticky.” 

“Amid a softening in GDP growth and labour markets we expect the BoC [Bank of Canada] to stay on the sidelines, holding rates steady into 2024,” the report’s authors said. 


Amid economic uncertainty, the report highlighted that consumer spending was “essentially unchanged” in the second quarter and is expected to slow down further in the third quarter. 

“Spending on goods has softened significantly with retail sales volumes falling three per cent at an annualized rate in the second quarter,” the report said. 

“Though spending on services has been stronger, it’s also showing signs of slowing down.”