Canada headed for 'severe' and 'inevitable' recession in 2023: economist
Canada is headed for a recession in early 2023, according to one economist.
"I don't think that we're in a recession just yet, but I do think that one is on the horizon," David Doyle, the head of economics at Macquarie Group, told BNN Bloomberg. "Our baseline is that Canada will enter a recession in the first quarter of 2023."
Macquarie Group, an Australia-based global financial services provider, estimates Canada will face an approximately three per cent contraction in gross domestic product (GDP) and a five per cent rise in its unemployment rate during the predicted recession.
"We actually think it will be pretty severe in Canada," Doyle said. "I think the die has been cast on this front. Because inflation has become so elevated, and unemployment was allowed to fall so low, I think a recession is almost inevitable at this point."
According to new data from Statistics Canada, the Canadian economy grew by a modest 0.1 per cent in July. Their estimates, however, show economic growth stagnating in August, when the annual inflation rate reached 7.0 per cent, down from a high of 8.1 per cent in June.
"I think what you're seeing is that the economy is stalling after having that significant boost from reopening earlier this year," Doyle explained. "I think it's appropriate to think that there's further slowing ahead, even after what looks to have been a very soft third quarter."
Canada's cooling housing market will play a significant role in that slowing, Doyle added. The latest Statistics Canada figures show output from real estate agents and brokers dropping 3.4 per cent in July, down for the fifth consecutive month. Doyle expects the trend to continue.
"Typically, you see housing start to weaken as you head into a recession," Doyle said. "We're certainly seeing ample signs of that."
Aimed at fighting inflation, the Bank of Canada raised interest rates to 3.25 per cent on Sept. 7, which has contributed to the cooling housing market. The increase followed a full percentage point hike in July, which was the largest single rate increase in Canada since August 1998. The Bank of Canada began hiking interest rates in March, after they fell to 0.25 per cent during the COVID-19 pandemic.
Economists widely predict the next interest rate hike will come on Oct. 26. Doyle thinks it could be the last.
"But it will likely be potentially six, nine, 12 months before we start to see the Bank cutting rates again," Doyle said. "That's because they'll want to be certain that they brought inflation under control."
Doyle believes there is a silver lining to the predicted recession.
"Often when you see a recession, it proves to be enough to bring inflation back down," he said.
With files from BNN Bloomberg
At first glance, it might seem like the deals have never been better as posters in store windows and online ads trumpet a steady stream of holiday sales. But some consumers say the discounts are more hype than real.
With the 2023 post-secondary education application deadlines approaching, many students across Canada are looking for alternatives to university and college, leaving parents anxious taking a ‘gap year’ could mean they never return to school.
Wouldn't it be nice to never have to work again? While this may sound like a dream to many, it is entirely possible. CTVNews.ca personal finance contributor Christopher Liew shares a handful of helpful tips on how to potentially achieve financial independence.
Recent homebuyers with variable-rate mortgages will find the adjustment to higher interest rates more painful, said Bank of Canada senior deputy governor Carolyn Rogers.
Buying your first car can be as exciting as it is daunting. Whether you’re buying a car off the lot from a dealership or purchasing a car in a private sale, contributor Christopher Liew shares in an exclusive column for CTVNews.ca a few basic tips that you should always keep in mind.
In March 2022 alone, food banks across Canada had 1.5 million visits, a 15 per cent increase from the year prior and the highest recorded usage on record.
Many Canadians have one or two old credit cards that they no longer use. Before you jump to close your old, unused credit card, CTVNews.ca contributor Christopher Liew outlines some of the pros and cons of closing a credit card account, so you can make the most informed decision.
Canadians are buying less expensive food, stockpiling food and even eating less to cope with food prices as inflation soars, according to a new survey.