Economy

Canadian Economic Outlook 2025–2026: What Every Canadian Needs to Know

As Canadians navigate through 2025, there’s one word that keeps popping up: change. From housing prices to inflation, tariffs, US relations, world crisis, workforce disruptions, to gold prices, this year is unlike any other. And if you’re wondering what lies ahead in 2026, we’ve gathered the latest facts, data, and forecasts to help make sense of it all, and we will try to capture the Canadian economic outlook in an understandable version. Many news outlets these days talk about great numbers, while others predict a grim outcome and do not share good news. It all depends on which side of the political fence they are on! But what is the truth, what is the reality and can we connect the dots for a reasonably true outcome? While no one has a crystal ball, some facts and available numbers can create a plausible pathway. We all see and feel a worrisome economic downturn and less money in average Canadian pockets, but is that the downward spiral path Canada is on, or should we be more optimistic for a better 2026? Numbers are mind-blowing, the housing market is correcting, jobless numbers are on the rise, but we also see a rise in road renovations and new road construction! So, where are we as Canadians? How are we really doing as a country?

Let’s dive into the current state of the Canadian economy, let’s sum up the Canadian economic outlook, and what it means for you, your wallet, and your future. Or should we say, let’s try to get data, facts and make a plausible path we are all on.

Job Market: Steady Gains in Canadian Economic Outlook, But Not All Smooth Sailing

What we see all around us is the closing of some big US retailers in Canada. Starting with Lowe’s and Nordstrom, to the recent closure of Hudson Bay has made Canadians worry about the future. But are the numbers available to us supporting the retail downturn in the job market? How many jobs have we lost and how many have we gained? Is the Canadian economic outlook bleak or promising?

Employment Losses

March 2025: Canada recorded a net loss of 32,600 jobs, marking the first decline in over two years. Most of the losses were in full-time employment, amid growing concerns over U.S. tariffs affecting export industries.
April 2025: There was a minimal net gain of 7,400 jobs, but overall hiring remained weak. April also saw strong layoffs, with 30,000 jobs lost, as unemployment rose to 6.9%

Employment Gains

April to May 2025: Employment rebounded modestly with a gain of 8,800 jobs in May—mainly due to full-time hires (+58,000), offset partially by part-time losses (-49,000). However, the unemployment rate hit 7.0%, the highest in nearly four years.
June 2025: A strong recovery occurred, with a net gain of 83,100 jobs, the first monthly increase since January. Sectors leading this growth include:
- Wholesale & retail: +33,600
- Manufacturing: +10,500
- Health & social assistance: +16,700
- These gains brought the unemployment rate down to 6.9%.

Sectoral Breakdown & Workforce Dynamics

Month	Net Jobs Change	Key Sector Gains	Key Sector Losses
March	–32,600	N/A	Full-time roles (export industries)
April	+7,400	Some full-time rebound	Full-time down; 30k losses recorded
May	+8,800	Full-time (+58,000)	Part-time (–49,000), public/admin
June	+83,100	Wholesale, Manufacturing, Health	Agriculture (–6,000), Transportation (–3,400)

Canada added over 83,000 jobs in June 2025, led by retail, manufacturing, and healthcare. But beneath those headline numbers, tech sector layoffs in Toronto are causing concern, especially among young professionals.

Inflation & Interest Rates in Canadian Economic Outlook: A Balancing Act

How do we feel about inflation? Every Canadian could sing a song about it! There is measured inflation with government-set parameters, and there is felt inflation every Canadian feels. From going shopping to travelling, insurance, housing, food and leisure, Canadians would probably say we have about 10% or more inflation every year. Today’s breaking news has hit home for many Canadians. With the headline “More than 1 in 4 Canadians (27%) Say They Can’t Pay All Their Bills at a Time When Millions Face Mortgage Rate Increases – TransUnion Study” even the most optimistic citizen could not read this and stay indifferent. Study suggests that more than 68% Canadians won’t be able to pay Credit Card payments.

Measured inflation suggests a 1.9% rise in June, up slightly from May. Core inflation (the stuff that doesn’t bounce around) remains high at 3.1%, keeping the Bank of Canada cautious. Interest rates are holding at 2.75%, but don’t expect major cuts unless the job market slows or inflation drops closer to 1.5%.

Prices may stabilize, but costs for groceries, gas, and rent are still tight for most families. And relief is still now on the horizon. If we look at inflation, interest rates and debt height, we do not have a good reason to celebrate. The Canadian economic outlook with mixed feelings here.

Canadian Dollar & Gold in canadianEconomic Outlook: A Mixed Bag

The loonie has been hovering between USD 0.73 and 0.75. While that’s not alarming, it does mean U.S. goods are pricier. Meanwhile, gold peaked at CAD $4,506/oz earlier this year. Why? Canadian pension funds are turning to commodities like gold to hedge against inflation.

Five-Year Exchange Trends

Currency Pair	Approximate 2020 Value	2025 Mid-Point	2025 Rate (July 17)
CAD–USD	0.70–0.75	0.72–0.74	0.7273
CAD–EUR	0.65	~0.64	0.6277

Practical Takeaways

Importers/Travelers:
CAD to USD conversion at ~0.73 means importing US goods is slightly more expensive than 5 years ago.
For Europe, travel now costs more as one CAD buys less EUR than in 2020–2021.
Exporters:
- A weaker CAD compared to euro gives Canadian exporters competitive pricing in Europe, but a stronger euro means continent-based buyers pay more in USD terms.
Investors & Forex Traders:
- CAD remains a wakable “commodity currency”, influenced by oil and global risk sentiment

Housing in canadian Economic Outlook: Still a Headache

Housing starts ticked up 0.4% in June, a surprise to many analysts. But affordability remains Canada’s Achilles heel. Ontario’s average home now costs over $900,000, and in cities like Toronto and Vancouver, rent has crossed $2,400/month.

Affordable? No!

Rent Affordability Remains Challenging

Again, rent prices in general are combined and do not represent a factual standpoint in every community! The Greater Toronto Area and the Greater Vancouver area did not see any decrease as official numbers suggest; on the contrary, rent prices are on the rise! One must only look at REALTOR.ca and compare prices from 2020 up every year, and the clear rise in prices is evident. Rise in rents has been traced from 2.5% to 6% annually. A decrease of 2,7% is in many communities is wishful thinking.

Official combined numbers:

Canada’s average asking rent dropped to $2,125 in June, down 2.7% YoY — the ninth consecutive monthly decline
Yet, compared to March 2022, rents are still 12-to-25% higher .
Purpose-built units: +25–35% rent growth since 2020; condos: almost flat
Rent-to-income ratios surged through the pandemic, peaking at 16–17% in Toronto and Vancouver, with modest improvements only by March 2025

The Renters’ Dilemma: Rent vs Buy

A 2025 survey shows 54% of renters want to buy within five years, but 40% are waiting for home prices to drop, and 29% await interest rate cuts
Renter strategies include:
- Roommates or shared suites — growing popularity due to cost savings.
- Delaying home purchase — planning for a better market moment.
- Household budgeting — cutting discretionary spending or taking extra jobs.

Home Prices: Plateau with Regional Variances

National average home price in May: $691,300, up 1.7% from April but down 1.1% YoY
Provincial landscapes:
- BC: $959k avg, –4.3% YoY; Greater Vancouver: $1.27M, –5.9% YoY .
- Quebec: $548k avg, +8.9% YoY; Halifax: $626k avg, +6.1% YoY .
- Alberta/Manitoba/Saskatchewan: priced between $410k–$530k with moderate YoY growth .

Canadian Economic Outlook & What to Watch

Rental market: Expect further softening in rents, particularly where new supply meets demand
Home prices: Forecasted to stabilize in 2025, with pressure continuing into 2026 — but affordability still a challenge
Policymakers: Pressures remain high to speed up affordable housing initiatives, especially in metro areas.

Trade & Tariffs: New Risks on the Horizon

A boiling point for many! News outlets have for sure added fuel to the fire here! Tensions with the U.S. are back — with Washington hinting at new tariffs on steel and autos. But, is this the biggest Canadian issue? According to the media, this is the number one headache and an unnecessary nuisance. It is for sure a nuisance for the Canadian economy, but does this aspect deserve such media coverage? A Yale study suggests Canada could lose 2.1% of GDP if tariffs go full swing, but are we sure these are the biggest GDP losses? While everyone talks about US tariffs, no one or very few talk about tariffs between Canadian provinces and territories! But hey, let’s not talk about that! Did anyone hear about a big investment in the manufacturing sector? Did any big companies open their doors in the past few months or years in Canada? What we surely notice is, distribution centres are popping up like mushrooms after the rain, but how about some solid money makers and quality work employers? While truck drivers and forklift operators could cheer on, how about Canadian engineers, technicians and line workers? Not everyone can be YouTuber, Influencer or a truck driver, can they?

The bright side? Canadian uranium exports are booming, especially to Europe. Cameco Corp. saw a 23% YoY rise in Q2 shipments. Big shift: Canada’s energy exports — LNG and uranium — are now economic lifelines.

2026 Forecast: Modest Growth, Cautious Optimism

Now, the question of many top questions Canadians ask: Will 2026 Canadian economic outlook be better than 2024 and 2025?

Economists expect 1.4% to 1.8% GDP growth in 2026, with inflation hovering near 2% — if no new global shocks occur. A mild optimism with a reserve of pessimism! While GDP is a general measurement of a country’s well-being, Canadians may or may not feel the improvement!

A general correction in the housing sector is needed in order to battle the affordability and general cost of living in Canada! Numbers that show lowering home prices are certainly encouraging. I know, many homeowners and investors might think differently, but these high home prices are unsustainable, and a correction is much needed. If we are honest, Canadians do not benefit from high housing prices! Builders don’t profit if homes don’t sell, realtors who have made a fortune during the upswing are hurting now, young Canadians can’t buy anything, while current homeowners don’t necessarily benefit from property taxes on higher-priced homes either.

Food prices most likely will not see corrections anytime soon, as tariffs and global tensions continue to destabilize food production and shipments of such.

Foreign investments are on the decline and will probably not recover during 2026, a recession in the making? Not necessary if our government invests in domestic production and local businesses. Struggling medium-sized and small-sized companies could be and should be supported. Domestic production, domestic services and domestic businesses of all sorts could be encouraged to hire new employees by boosting their financial stability. If we have to work more to sustain our way of living, so be it, but help is much needed from the government to support Canadian businesses struggling with debt payments!

Whether you have a deeper financial pocket or you struggle with debt payments, 2026 most likely will not be the year of golden eggs! Caution and financial intelligence may help you maneuver the rest of 2025 and most of 2026.

We will surely see radical changes and some previously unthinkable moves. This might be the year of longer work hours and financial restraints. So, the Canadian economic outlook is surely not better than 2025, but no reason for frustration and panic.