Economy to grow moderately, rates to fall below three per cent next year: Deloitte | Canada News Media
Connect with us

Economy

Economy to grow moderately, rates to fall below three per cent next year: Deloitte

Published

 on

 

Deloitte Canada expects economic growth to pick up next year as it forecasts the Bank of Canada to cut its key interest rate below three per cent by mid-2025.

In the company’s fall economic outlook released Thursday, it forecasts the central bank’s interest rate will fall to 3.75 per cent by the end of this year and a neutral rate of 2.75 per cent by mid next year.

Meanwhile, it expects the economy to grow moderately as softer labour market conditions persist, especially as many homeowners have yet to face higher rates when they refinance their loans.

“We do think that we’re going to be in for a decent year next year,” said Dawn Desjardins, chief economist at Deloitte Canada.

It appears Canada will successfully skirt a recession despite the impact of higher borrowing costs on the economy, said Desjardins.

“It’s hard to argue that the economy is just skating through this period of higher interest rates. But having said that, the overall numbers themselves continue to show the economy is expanding,” she said.

“Yes, the labour market has softened, but I don’t think we’re in any kind of crisis in the labour market at this time.”

The Bank of Canada has cut its benchmark rate three times so far this year as inflation has eased, and signalled more cuts are coming.

Inflation in Canada hit the central bank’s two per cent target in August, falling from 2.5 in July to reach its lowest level since February 2021.

However, higher rates have weighed on economic growth and the labour market.

Deloitte’s predicted 2.75 per cent neutral rate — the rate at which the central bank’s monetary policy is neither stimulating nor holding back the economy — is higher than where interest rates were hovering in the years before the COVID-19 pandemic.

Desjardins said the forecast aligns with the central bank’s own projections. There are a number of factors on the horizon that may pose increased risk to inflation, she said, such as climate change.

“These are costly things that we’re going to have to deal with and will be embedded in prices. So that’s sort of how we get to this 2.75 (per cent).”

The report says the global backdrop continues to be challenging, with no clear ends to the wars in Ukraine and the Middle East, growing trade frictions and an uncertain impact of the U.S. election on policy.

Consumers and businesses alike are still facing a lot of uncertainty, said Desjardins.

The heightened uncertainty, including from the looming U.S. election in November, makes businesses reticent to invest, she said, but added more clarity should come in the new year.

“We’ll see inflation coming down and interest rates coming down. So those are two powerful factors that will support an improvement in confidence both from the consumer side as well as the business side as we go through next year,” she said.

In its report, Deloitte said it’s still optimistic about Canada’s economy next year.

“Lower rates will ease the burden on the highly indebted household sector sufficiently to support a pickup in spending and a housing market recovery,” it said in the report. “After two years of subpar growth, we look for the economy to hit its stride in 2025.”

Deloitte said despite the easing of overall inflation, shelter prices — especially rent — “remain too high for comfort.” However, it also said interest rate cuts are expected to “rejuvenate construction activity,” with home-building activity set to rise throughout 2025.

While rate cuts should help stimulate the housing market, Deloitte said it expects the recovery to be modest amid poor affordability.

Desjardins said without a significant boost to housing supply, the affordability issue is unlikely to subside.

“We know that Canada has a pretty significant supply deficit on the housing side,” she said.

“The housing cannot be created overnight.”

However, she also doesn’t see house prices significantly increasing.

“I think we’re going to see some easing up on demand from new Canadians as we move forward. So that might give a little bit of a relief,” she said.

This report by The Canadian Press was first published Sept. 26, 2024.

Source link

Continue Reading

Economy

Quebec economic update: Growth numbers are 'less than stellar,' says expert – CBC.ca

Published

 on


[unable to retrieve full-text content]

Quebec economic update: Growth numbers are ‘less than stellar,’ says expert  CBC.ca



Source link

Continue Reading

Economy

Vladimir Putin is in a painful economic bind – The Economist

Published

 on


[unable to retrieve full-text content]

Vladimir Putin is in a painful economic bind  The Economist



Source link

Continue Reading

Economy

Which items will be tax-free under the Liberals’ promised GST/HST break?

Published

 on

 

The government on Thursday announced a sweeping promise to make groceries, children’s clothing, Christmas trees, restaurant meals and more free from GST/HST between Dec. 14 and Feb. 15.

“Our government can’t set prices at checkout, but we can put more money in people’s pockets,” Trudeau said at a press conference announcing the measures.

The government says removing GST from these goods for a two-month period would save $100 for a family that spends $2,000 on those goods during that time. For those in provinces with HST, a family spending $2,000 would save $260.

Thursday’s announcement also included a rebate for Canadians who worked in 2023 and made less than $150,000, totalling $250 per person.

Here are the items that will be GST/HST-free if the Liberals’ legislation passes.

Groceries

Many grocery items are already tax-free. The Canada Revenue Agency considers most food and beverages to be “basic” grocery items, such as produce, bread, cereal, canned and frozen food, eggs, coffee, milk, and meat.

However, certain categories, like carbonated drinks, candies and snack foods, are taxed.

The government’s tax break will apply to certain items that normally are subject to tax.

These include prepared foods such as vegetable trays and pre-made meals, as well as snacks such as chips, candy and granola bars.

Carbonated beverages, water bottles fruit juices and juice crystals are included, as are ice cream products and baked desserts like cakes and pies.

The government says its tax break will mean “essentially all food” will be GST/HST-free.

Alcohol

The tax break will also apply to alcoholic beverages below seven per cent alcohol by volume, including beer, wine, cider, and pre-mixed drinks.

Normally, all alcoholic drinks are taxed.

Restaurants

Restaurant meals will also be subject to the tax break. It will apply whether you’re dining in, taking food to go, or ordering delivery.

Children’s items

Children’s clothing, including baby bibs, socks, hats and footwear, will qualify for the tax break. So will children’s diapers and car seats.

Children’s footwear and clothing used exclusively for sports or recreational activities will not be included in the tax break. This includes costumes.

Children’s toys will be included in the tax break as long as they’re designed for use by children under 14 years old. These could include board games, dolls, card games, Lego, Plasticine and teddy bears.

Printed goods

Print newspapers will be included in the tax break, but electronic or digital publications will not.

Most flyers, magazines, inserts and periodicals will be excluded.

Printed books will be included in the tax break, including religious scripture. Audio books where 90 per cent or more of the recording is a reading of a printed book are included.

Printed items that aren’t subject to the tax break include magazines where advertisements take up more than five per cent of total printed space, sales catalogues and brochures, books designed for writing on, event programs, agendas and directories.

Other

Christmas trees, natural or artificial, will be included in the tax break.

Puzzles and video game consoles are also included.

This report by The Canadian Press was first published Nov. 21, 2024.

Source link

Continue Reading

Trending

Exit mobile version