Deloitte warns of tepid consumer spending as Canada’s economy slows

Dawn Desjardins, chief economist at Deloitte Canada, joins BNN Bloomberg to discuss the company's report on the outlook for Canada's economy going into 2026.

A new report forecasts Canadian growth will slow to 1.5 per cent this year from 1.7 per cent in 2025.

Dawn Desjardins, chief economist at Deloitte Canada, said she is cautiously optimistic though that the economy will gain momentum through the second half of the year.

“Overall growth is probably going to be a bit slower than in 2025. But when we’re thinking about the setup for 2027, if we’re correct about this momentum building in 2026, the second half, I think it sets up nicely for 2027,” she said.

Desjardins said last year was mired in disruptions and policy uncertainty, but that fears of a significant global economic slowdown “proved unfounded” as a recession in Canada did not materialize.

“Below the surface, however, volatility in trade activity played a bigger-than-usual role in the Canadian economic data and masked a softening in consumption and a pullback in business investment,” the report reads.

Desjardins said two key trends to watch this year are trade and investment, with the review of the Canada-U.S.-Mexico free trade agreement scheduled for July, and the federal government’s plans to stimulate billions in investment from the private sector outlined in its latest budget.

The report said the CUSMA review will be pivotal, and potential changes that restrict or eliminate access to the key American market present a risk, but her baseline assumption is that Canada will be able to maintain its favourable trading relationship with the U.S.

“That will alleviate some of this uncertainty. Now, that’s not assured, but it is our assumption. And we aren’t assuming that we’re going to necessarily see tariffs on specific industries go away, so there’s still going to be that impact on the economy,” she said.

Business investment may hit a turning point, Desjardins said, as firms get more clarity on trade and see support from the federal government, particularly in the infrastructure and natural resource sectors.

Getting more firms to invest could also help improve some of Canada’s long-standing issues around productivity, she said.

“We have to arm our workforce to be able to improve our productivity, our living standards (and) wages,” Desjardins said.

Regarding the health of the consumer, she expects spending to be softer in the first half of the year but says it could ramp-up in the second half if there are also improvements in the labour market.

“But overall for the year, our numbers don’t show a huge increase in spending. And the other factor, of course, is that we are seeing a population that is not growing,” she said.

Daniel Johnson, The Canadian Press