The Canadian economy may have entered a technical recession, according to preliminary data from Statistics Canada, but experts say people may not feel the difference just yet – though that could change quickly with interest rates currently elevated. 

Andrew Grantham, economist at CIBC Capital Markets, wrote in a note that Canada is “already skirting a recession,” based on preliminary economic data for the third quarter released from StatCan on Tuesday.

The estimated data from Statistics Canada data showed GDP shrank in the third quarter. That would fit the definition of a technical recession, which requires two consecutive quarters of negative growth, as GDP was also negative in the second quarter.

Statistics Canada said the preliminary third quarter estimates will be updated with official data on Nov. 30.

Grantham pointed out that the predicted economic decline is “very marginal,” and most people won’t notice a difference if the third-quarter GDP figures end up slightly positive or slightly negative.

“There's not a material difference whether we get a slight negative in Q3 or a slight positive in Q3 when the data comes out,” Grantham told in an interview.

“There's no real difference there for most people. It's just a technical difference.” 

Grantham said what's more relevant is that the data show the economy has stalled, and potentially declined slightly, over two quarters.

This is a “sign that past interest rate hikes are working maybe a little too well, or a bit better or quicker than the Bank of Canada even expected,” he said.

As a result, Grantham said interest rate cuts will be necessary next year in order to “avoid what I would describe as a proper recession or a deeper recession in terms of economic activity.” 

His note highlighted that weak economic activity amid gains in Canada’s population and labour force shows previous interest rate hikes have weighed on the economy. 

“We're not necessarily in a recession as yet. But, certainly momentum in the economy has stalled. This comes at a time when population growth and labour force growth are quite strong,” Grantham told “In per capita terms, we are seeing that weakness in economic activity.”

Alex Grassino, the co-head of global macro strategy at Manulife Investment Management, said in a statement to BNN Bloomberg Tuesday that the word “recession” is being more widely discussed in relation to Canada’s economy when compared to a few weeks ago.

He said August’s GDP figures are “adding fuel to the fire.”

“We’re not overly focused on whether or not we meet the technical criteria for a recession, though: the bottom line is that Canada’s been experiencing weak private demand for most of 2023, and this is just a continuation of that trend,” Grassino said.

He added that volumes for retail sales have been negative over the past four months.

“Developments like this hardly paint a rosy picture, and equity market returns are already reflecting a weaker economic picture: Energy is the only positive returning sector in the last six months,” Grassino said.

According to Grassino, if the current economic trends continue, interest rates could start to come down during the first quarter of next year. 


Another expert said higher interest rates make Canada more vulnerable during an economic downturn due to the country’s high housing-related debt levels.

“We know that the household sector has excessive debt at this point, the housing market is over-levered and it's in a bubble,” Phillip Colmar, managing partner at MRB Partners, told BNN Bloomberg in a Tuesday television interview. 

Because of these debt conditions, Colmar warned that an economic slowdown in the country could escalate quickly. 

“Canada doesn't have a lot of luxury to fall into a mild recession,” he said. “It has a quick likelihood that that spirals into something much more ominous.”

With files from the Canadian Press