Concerns over the state of the Canadian economy are growing after a new report showed the country is at risk of heading into recession if economic growth fails to improve.
Rosenberg Research's chief economist David Rosenberg said the outlook for the Canadian economy remains weak despite several interest rate cuts that have been implemented previously.
The firm's latest report found that Gross Domestic Product (GDP) per capita continued to decline, while overall economic growth was only around one percent per year, indicating a very slow recovery momentum.
The Canadian economy is projected to contract by 0.5 percent annually in the fourth quarter, lower than the Bank of Canada's zero growth forecast.
The manufacturing sector also performed poorly as output fell by about five percent, while house prices fell two percent year-on-year, putting additional pressure on domestic demand.
With the economy contracting in two of the last three quarters, Canada is now on recession watch for 2026.
Inflationary pressures appear to be easing as most measures of core inflation are within the Bank of Canada's comfortable target range, paving the way for further interest rate cuts.
However, risks to the Canadian dollar are expected to increase due to slowing economic growth and the potential for monetary easing.
The housing sector has also failed to show a significant recovery as residential construction spending has remained flat over the past year, while national home prices have fallen for 10 consecutive months.
