Canadian Economy Faces Headwinds as Growth Slows Down

Canada's economy experienced a rebound in the second quarter of 2025, thanks to a recovery in energy exports and consumer spending. However, this growth is not sustainable, according to RBC Economics, which expects it to decelerate noticeably in the second half of the year.

The bank's analysis points to several headwinds that could weigh on Canada's economic growth. Elevated interest rates are expected to dampen consumer spending and housing activity, while global trade tensions and slowing growth in key trading partners pose risks to export demand.

Inflation remains above the Bank of Canada's target, limiting its ability to cut rates. RBC projects that the policy rate will remain restrictive through 2025, further constraining economic activity.