Canada’s economic outlook for the third quarter is losing momentum, raising doubts about whether growth can meet the central bank’s expectations. With fresh GDP data for September and an early look at October set to shape the final assessment, underlying indicators point to a softer performance than previously projected.

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The Bank of Canada had anticipated a modest rebound, calling for annualized third-quarter growth of 0.5 per cent and a further pickup heading into year-end. However, weakening consumer spending, sluggish investment, and inconsistencies in early GDP estimates suggest the economy may struggle to reach those targets. Even if growth manages to eke out a small gain in the third quarter, Canada would only narrowly avoid a technical recession following the contraction in the previous quarter.

Recent monthly data shows limited improvement. September GDP is expected to post only a slight uptick after the prior decline, and retail activity continues to reflect cautious household behaviour amid softer labour conditions and broad economic uncertainty. Additional ambiguity comes from a delay in trade data, leaving overall third-quarter contributions from net exports unclear.

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Multiple economic models indicate that early GDP estimates this year have often been revised downward, underscoring the risk that upcoming figures could be weaker than initial projections. A flat or near-zero reading for the quarter remains a realistic possibility.

While several major Canadian banks still expect growth in line with the central bank’s outlook, they acknowledge that missing trade numbers and persistent consumer softness could trigger revisions. Early signs for the fourth quarter also remain muted, with no material improvement in spending trends and a continuation of below-potential growth.