Canada is still at risk of entering a recession within the next six months, according to sentiments in a survey by the Bank of Canada of business and financial leaders across the country.
The Bank of Canada released its third-quarter Market Participants Survey Monday, which gauges the economic outlook from respondents every three months.
Three out of four respondents said there’s a 43 per cent chance that Canada would enter a recession within the next six months, while the bottom quarter of respondents said there was a 30 per cent risk.
Participants of the survey included representatives from banks, dealers, pension funds, insurers and asset-management and research firms.
The survey comes shortly after the central bank cut interest rates in late October, but was conducted near the end of September 2025, and as trade tensions fuelled by U.S. President Donald Trump’s tariff policies continue to weaken the Canadian economy and the job market.
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A technical recession is defined as two consecutive quarters of negative growth in the economy, measured by Gross Domestic Product (GDP).
Respondents painted a grim outlook for GDP in the Bank of Canada’s survey.
Nearly 90 per cent said Canada’s economy, measured by GDP, is churning along below its true potential, with just over 10 per cent saying GDP is right around where it should be.
Where is Canada’s GDP now?
Statistics Canada said that August saw the economy shrink by 0.3 per cent, but the third quarter (July through September) is still on track for modest growth of 0.4 per cent overall.
The second quarter saw a drop of 1.6 per cent amid the trade war while companies adjusted to shocks brought on by Trump’s tariffs and Canada’s counter tariffs, including higher costs.
This means there is a good chance the Canadian economy avoided a recession through September, but the future remains unclear, especially given the uncertainty of the trade war.
When asked what the main factors are that will determine how Canada’s economy will perform, most survey participants cited how trade tensions evolve.
Easing trade tensions was cited by 87 per cent of respondents as being the most important goal for Canada’s economy, and 90 per cent said increasing trade tensions is the biggest risk to the economy.
Other risks for the economy included 63 per cent of respondents pointing to weaker consumer spending, while 40 per cent said a weaker housing market was the riskiest.
Trump suspended trade negotiations with Prime Minister Mark Carney in late October after an anti-tariff ad campaign produced by the Ontario government aired in the U.S.
The central bank cut borrowing rates in October to give the economy some breathing room and help spur investment and job creation.
Bank of Canada governor Tiff Macklem said the Bank’s ability to help the economy by adjusting interest rates may have hit its peak, and that fiscal measures may need to take the steering wheel from here in helping Canada’s economy.
Carney’s recently tabled budget, aimed at boosting the Canadian economy amid the trade war, is set for a final confidence vote later this month.
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Canada faces recession risk over next 6 months, most financial leaders say
