Q3 2026 Economic Outlook

Foreword by Judith Bosire, Chief Economist ​

The economy looked stronger entering the third quarter, but the risks became harder to ignore.​

Economic growth returned, but it did not translate into more breathing room for many households or greater confidence among local businesses. Jobs declined toward the end of the quarter, fixed borrowing costs remained elevated, and essential expenses continued to absorb a large share of household budgets. This is the difference between an economy that is growing and one that feels as though it is recovering.​

Canada entered the summer with recession concerns easing. Second quarter growth was stronger than expected, household spending remained positive, and business investment and exports rebounded. By the end of Q3, however, the operating environment had become more difficult. New U.S. tariffs and Canadian countermeasures raised costs and uncertainty. Headline inflation increased to 3.1 percent in September, while employment declined for a second consecutive month. Long term bond yields moved higher, tightening borrowing conditions even as the Bank of Canada held its policy rate at 2.25 percent.​

The result is an economy that is growing, but with less room to absorb another shock. Canada lost 68,000 jobs in September after losing 42,000 in August, and the unemployment rate increased to 6.5 percent. British Columbia remained exposed to tariffs, housing weakness, population decline, and elevated financing costs, while major projects, energy investment, transportation, and exports provided support.​

As Canada moves toward the end of 2026, modest growth remains the most likely outcome. The central question is whether the recovery can continue while tariffs, energy costs, bond yields, and political transition hold back investment and delay financial relief for households and businesses.​