Inflation and a tightening labour market threaten to spillover into 2023, despite recent economic progress.
Housing affordability will become more of an issue with rising interest rates and inflation threatening to put a lid on the construction industry for the foreseeable future.
Despite challenges, Canadian businesses have an opportunity to benefit from the United States’ Inflation Reduction Act and climate change commitments.
Prairie provinces have played a key role in supporting the economy due to growing global demand for energy and rare metals.
TORONTO, Oct. 3, 2022 /CNW/ – RSM Canada (“RSM”), a leading global provider of audit, tax and consulting services focused on middle market businesses, today launched its third 2022 edition of ‘The Real Economy, Canada‘ – a quarterly report that provides Canadian businesses with analysis and insights on the country’s complex economic conditions.
As governments and industries around the world grapple with inflation, rising costs and a breadth of other economic hurdles, the latest edition of The Real Economy, Canada examines how Canada’s economy is faring at the moment, and what key issues and opportunities businesses need to be aware of in the coming months.
Key findings in this quarter’s report include:
Recession talk is pre-mature, though economic headwinds are having an impact.
The Canadian economy has bounced back strong from pandemic lockdowns, as pent-up consumer demand and government support have fueled GDP growth in every quarter since the third quarter of 2021.
However, inflation and a rising unemployment rate, combined with persistent labour and housing shortages present elevated risk that Canada could enter a recession early next year.
Inflation will take a while to slow despite potential summer peak, as the war in Ukraine grinds on and the labour market remains tight.
Businesses should expect the Bank of Canada to continue raising rates for the rest of the year rather than easing them prematurely.
Canada will need to accelerate its immigration goals to address long-term labour and productivity problems.
Declining labour force participation rates, an aging population and declining fertility rates mean that Canada must rely on immigration – rather than natural growth – to replenish the labour pool.
Canadian policymakers are aiming to bring in more than 400,000 immigrants per year between 2022 and 2024 following the growth immigration has spurred in the millennial and Gen-Z workforce.
Immigrants are also shown to increase productivity rates, something Canada cannot afford to ignore as labour productivity in Canada might fall to last among countries in the Organisation for Economic Co-operation and Development in just a decade.
However, Canada must streamline the accreditation process if it wishes for skilled immigrants to fill the labour gaps that are most glaring, such as in the health care industry.
Higher interest rates have cooled Canada’s housing market, but demand remains high.
The construction industry has been hit hard by rising interest rates and the resulting slowdown now threatens to make Canada’s housing shortage more acute.
Rising rates, combined with inflation, threaten to put a lid on housing construction for the foreseeable future, potentially further worsening the housing affordability crisis in Canada.
While most industries gained jobs, the construction industry lost over 23,000 in April and June, despite the red-hot labour market.
However, the Canada Mortgage and Housing Corporation’s new mortgage loan insurance program is giving developers access to mortgages with more favourable financial terms, which incentivizes them to build more affordable housing and energy efficient housing projects.
Canada will stand to benefit from the United States’ Inflation Reduction Act and green energy transition.
This legislative and financial commitment by Canada’s closest trading partner provides Canadian companies with some certainty as to where they can hang their hats from an economic development perspective.
Canada’s mining and manufacturing sectors will be well-positioned to benefit as they provide the products and minerals necessary to facilitate the clean energy transition, particularly when it comes to electric vehicle development.
Though Canada’s climate change strategy has been fairly robust, the IRA and the resulting opportunities will help provide a clearer picture of how to economically build and scale clean energy industries.
Canada’s industrial sector is reaping the benefits of strong global demand.
The Prairie provinces have been leading the economy because of growing global demand for energy and rare metals.
Canadian industrial production grew over five per cent year-over-year in the second quarter, well above the pre-pandemic level, and is expected to end the year on a high note.
However, industrial production may diminish in subsequent months as global markets anticipate a recession and consumer demand slows.
“Despite a robust recovery from the lockdowns of the COVID-19 pandemic, Canadian economic growth will continue slowing down due to persistent inflation and an historically tight labour market,” says Tu Nguyen, economist and ESG director with RSM Canada. “But the real long-term challenge will be the labour shortage, with declining worker participation hitting the health care, hospitality and food services industries particularly hard.”
Nguyen continues: “There’s also a fundamental shift in the demographic of Canada’s labour force, causing policymakers to explore ambitious immigration goals to address the labour gap. But government, industry associations and organizations will actually need to go further and streamline the accreditation process so that workers educated abroad can fill much-needed roles in Canada. Only then can Canada hope to have more meaningful growth in labour supply and productivity.”
For more information on RSM Canada’s ‘The Real Economy: Canada‘, or to download the report, please visit their webpage.
About RSM Canada
RSM’s purpose is to deliver the power of being understood to our clients, colleagues and communities through world-class audit, tax and consulting services focused on middle market businesses. The clients we serve are the engine of global commerce and economic growth, and we are focused on developing leading professionals and services to meet their evolving needs in today’s ever-changing business environment.
RSM Canada LLP provides public accounting services and is the Canadian member firm of RSM International, a global network of independent audit, tax and consulting firms with 51,000 people across 123 countries. RSM Alberta LLP is a limited liability partnership and independent legal entity that provides public accounting services. RSM Canada Consulting LP provides consulting services and is an affiliate of RSM US LLP, a member firm of RSM International. For more information visit rsmcanada.com, like us on Facebook, follow us on Twitter and/or connect with us on LinkedIn.
SOURCE RSM Canada
For further information: Media contact: Stephen Colle, FleishmanHillard HighRoad, 416-939-6649, [email protected]
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets also climbed higher.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
This report by The Canadian Press was first published Sept. 13, 2024.
OTTAWA – Statistics Canada says wholesale sales, excluding petroleum, petroleum products, and other hydrocarbons and excluding oilseed and grain, rose 0.4 per cent to $82.7 billion in July.
The increase came as sales in the miscellaneous subsector gained three per cent to reach $10.5 billion in July, helped by strength in the agriculture supplies industry group, which rose 9.2 per cent.
The food, beverage and tobacco subsector added 1.7 per cent to total $15 billion in July.
The personal and household goods subsector fell 2.5 per cent to $12.1 billion.
In volume terms, overall wholesale sales rose 0.5 per cent in July.
Statistics Canada started including oilseed and grain as well as the petroleum and petroleum products subsector as part of wholesale trade last year, but is excluding the data from monthly analysis until there is enough historical data.
This report by The Canadian Press was first published Sept. 13, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in the base metal and energy sectors, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 172.18 points at 23,383.35.
In New York, the Dow Jones industrial average was down 34.99 points at 40,826.72. The S&P 500 index was up 10.56 points at 5,564.69, while the Nasdaq composite was up 74.84 points at 17,470.37.
The Canadian dollar traded for 73.55 cents US compared with 73.59 cents US on Wednesday.
The October crude oil contract was up $2.00 at US$69.31 per barrel and the October natural gas contract was up five cents at US$2.32 per mmBTU.
The December gold contract was up US$40.00 at US$2,582.40 an ounce and the December copper contract was up six cents at US$4.20 a pound.
This report by The Canadian Press was first published Sept. 12, 2024.
