WHY IT MATTERS: The health of Canada\u2019s economy is important because a lot of agricultural products are sold domestically.<\/p>\n
However, Sobool said it is more nuanced than that. Economists also look at other factors, such as how many sectors of the economy experienced a downturn and how the labour force is performing.<\/p>\n
If Canada experienced a recession, it certainly was not as pronounced as previous ones.<\/p>\n
And it appears to have been short-lived.<\/p>\n
FCC\u2019s expectation is that the economy rebounded in the second quarter of 2026, growing by an estimated 2.5 per cent.<\/p>\n
Read Also<\/p>\n
However, there is no doubt that U.S. tariffs have caused considerable turmoil and volatility that is weighing on the Canadian economy.<\/p>\n Farm Credit Canada is forecasting that Canada\u2019s economy will grow by 0.9 per cent in 2026 and 1.4 per cent in 2027. FCC expects Canadian GDP will grow by a paltry 0.9 per cent in 2026, followed by 1.4 per cent in 2027. That would be five years in a row where growth was two per cent or less.<\/p>\n \u201cThat is just not sufficient,\u201d said Sobool.<\/p>\n \u201cOur growth should be above two per cent.\u201d<\/p>\n Product inventories increased by 4.3 per cent in the first quarter of 2026, indicating that businesses are either anticipating a surge in future demand or that consumer purchasing has slumped.<\/p>\n Capital spending was down one per cent, which was a huge drain on GDP.<\/p>\n A mere 68 per cent of Canadian businesses polled in the second quarter of 2026 felt optimistic about the next 12 months, compared to 73 per cent before implementation of U.S. President Donald Trump\u2019s reciprocal tariffs.<\/p>\n \u201cWhen the tariffs hit, business sentiment just tanked,\u201d said Sobool.<\/p>\n Canada\u2019s labour productivity grew at a rate of 0.7 per cent in 2025, which is above the G7 average but well below the U.S. market.<\/p>\n If productivity in Canada\u2019s agriculture and food sector simply returned to historic levels, it would generate $28 billion in labour income, create 240,000 jobs and contribute $71 billion to GDP.<\/p>\n \u201cThat\u2019s massive,\u201d said Sobool.<\/p>\n \u201cThis is the opportunity.\u201d<\/p>\n Inflation climbed to 3.2 per cent in May. FCC expects the full-year rate to end up at 2.7 per cent.<\/p>\n Energy price increases have yet to flow through the entire supply chain. There is typically a six- to 12-month lag for that to happen, so inflation will likely be pronounced again in 2027.<\/p>\n FCC expects the Bank of Canada\u2019s overnight rate to remain at 2.25 per cent for the remainder of 2026, but it will likely experience two hikes in 2027, climbing to 2.75 per cent by the end of the year.<\/p>\n That is going to drive up both the variable and fixed rate costs of borrowing. The fixed rate hinges on the five-year Government of Canada bond rate.<\/p>\n \u201cDebt is not going to get any cheaper,\u201d said Sobool.<\/p>\n \u201cThe bond market is not a fan of tariffs and it\u2019s not a fan of the U.S. debt, which is approaching US$39 trillion.\u201d<\/p>\n The Canadian dollar is expected to continue trading in the US$0.72 to $0.74 range, which benefits exporters but not importers.<\/p>\n Trade uncertainty a certainty<\/p>\n
\n ![\"Peas](\"https:\/\/www.newsbeep.com\/nz\/wp-content\/uploads\/2026\/07\/343714_web1_KJB07222024_Yukon_peas-150x113.jpeg\")
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\n Farm Credit Canada<\/p>\n