Our economic outlook for Canada

September 19, 2024

Our outlook for year-end 2024

1.25%–1.5%

Economic growth,
year over year

The economy grew by 0.5% in the second quarter, greater than 0.4% first-quarter growth. We expect below-trend growth in a range of 1.25%–1.5% for the full year amid monetary policy restrictiveness that has been more potent than in the U.S.

2.1%–2.4%

Core inflation, year over year

Headline inflation slowed in August to its smallest gain in three and a half years. The Consumer Price Index rose by 2.0% year over year, down from 2.5% in July and representing the slowest pace since February 2021. The pace of core inflation, which excludes volatile food and energy prices, also slowed, to 2.4% year over year compared with 2.7% year over year in July. We foresee core inflation ending 2024 in a range of 2.1%–2.4% on a year-over-year basis.

3.75%–4%

Monetary policy rate

On September 4, for a third consecutive meeting, the Bank of Canada (BOC) cut its overnight rate target by 25 basis points, to 4.25%. The bank noted that the labor market continued to slow and that inflationary pressures had broadly eased, though inflation remained elevated in some areas of the services sector. We foresee the equivalent of one to two additional quarter-point rate cuts this year, which would leave the overnight rate target in a range of 3.75%–4% at year-end.

6%–6.5%

Unemployment rate

Canada’s economy added jobs in August for the first time in three months, but the unemployment rate rose as the labor force continued to expand. Part-time work fueled the job growth, with 65,700 positions added. However, full-time employment fell by 43,600, for a net gain of 22,100 jobs. The unemployment rate rose to 6.6% from 6.4% as the labor force grew by 82,500 workers. We anticipate the unemployment rate ending the year around current levels, though risks skew higher as still-restrictive monetary policy could eat into demand and, ultimately, corporate profitability.

What I’m watching


The effect of policy easing on below-trend growth

Canada’s economic growth, unlike that of the U.S., remains below its prepandemic trend. Restrictive monetary policy intended to fight inflation constrained activity, leaving Canadian GDP growth well below potential. However, with the BOC having started a policy-easing cycle, we anticipate that the output gap could remain around 4% at year-end 2024.


Vytas Maciulis

Vytas Maciulis,
Vanguard Economist

Notes: GDP is indexed to 100 in the fourth quarter of 2007 (not shown). The prepandemic trend line is based on data from 2015 through 2019. 

Sources: Vanguard calculations using data from Refinitiv as of March 31, 2024, and Vanguard forecasts thereafter. 

Notes: All investing is subject to risk, including the possible loss of the money you invest. 

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