Canada’s Economy Faces Challenges: Growth Slows, Inflation Rises

Today's expected range for the Canadian Dollar against the major currencies:

US Dollar        1.3940-1.4160

Euro                 1.4710-1.4920

Sterling            1.7790-1.7990

WTI Oil (opening level) $68.84

The Canadian Dollar is opening at 1.4060 (0.7112). Economic indicators continue to highlight challenges for Canada. Statistics Canada recently reported that the country’s per capita GDP has declined for the sixth consecutive quarter, even amid rising government spending. The Bank of Canada’s forecast of 1.5% GDP growth last quarter fell short, with actual growth at 1%. Adjusted for population growth, this resulted in a 0.4% contraction per capita.

Inflation remains a pressing concern, climbing to an annualized 4.8% last month. This puts policymakers in a difficult position—cutting interest rates to stimulate the economy risks driving inflation even higher. At the same time, wages have remained largely stagnant, while costs of living, particularly housing, have soared. The average Canadian now spends 48% of family income on mortgage payments, with that figure climbing to 70% in cities like Vancouver and Toronto.

Business investment has also been in decline, impacting long-term productivity and economic growth. Household debt, already the highest in the G7, further exacerbates the economic strain. Addressing these challenges will require a balanced and strategic approach to strengthen economic fundamentals, support investment, and improve affordability. Without clear action, the Canadian Dollar could face continued pressure, with projections suggesting a potential weakening to 1.45.