TORONTO — The Canadian economy will return to growth in the second half of 2024, with interest rate cuts as early as this spring, according to a new forecast by Deloitte Canada.
The firm’s economic outlook predicts stagnant growth during the first half of the year as the effects of higher interest rates continue to work their way through the system.
Deloitte Canada chief economist Dawn Desjardins said that while this could mean a technical recession — two quarters or more of negative GDP growth — it’s unlikely the Canadian economy will see the deep decline or labour market rout that typically accompany a true recession.
Momentum in the economy and the job market is poised to improve in the second half of 2024 as confidence starts to recover, Desjardins said.
We have a pretty substantive recovery in our forecast
Dawn Desjardins
The Canadian economy shrank in the third quarter of 2023, contracting 1.1 per cent on an annualized basis while growth was flat for a third straight month in October. Statistics Canada’s early estimate for November suggests an increase in real GDP for November of just 0.1 per cent.
The Bank of Canada held its key interest rate target steady at five per cent in December after a heavy-handed hiking campaign to fight inflation.
Deloitte said inflation is still uncomfortably high at 3.1 per cent as of November, but it’s unlikely the central bank will hike rates further. It predicts the central bank will begin cutting rates as soon as the path to its two per cent target is clear, something that it expects will likely be in the spring.
However, Desjardins said Canadians shouldn’t expect or even want interest rates to return to their pre-pandemic lows.
“We’ve gone through periods post-financial crisis, where we have had globally very, very low interest rates. And that sort of became the norm,” she said.
Household spending on goods and services stalled toward the end of 2023, the Deloitte report said, and even though inflationary pressures are easing, shelter costs continue to post strong growth amid a housing shortage and rising population.
“The outlook for consumer spending on housing and goods and services depends on the future path of interest rates and the health of the labour market,” the report said.
The Deloitte report predicts soft job growth in the near term but robust wage gains as workers continue to try and catch up to inflation. However, wage gains will begin to slow toward the end of 2024, while job growth will accelerate, the report said.
Consumer spending will likely remain “muted” through the first half of 2024 before picking up momentum heading into 2025, the report said.
The biggest wild card going forward will be the labour market, she said: “If the labour market is able to hang in, you know, we’ll get through this.”
Households in Ontario and British Columbia have particularly high debt-to-income levels due to their housing markets, Desjardins said.
Those two provinces, alongside Quebec, have the lowest real GDP forecasts for 2024 in the Deloitte report at 0.2 per cent.
As the economy continued to slow, real non-residential business investment dropped in the third quarter of 2023, the Deloitte report said. That weakness is expected to continue in the near term as businesses are more pessimistic about slowing demand and sales, the report notes — some are planning to slow hiring or invest less in machinery and equipment.
That weakness will likely be most evident in oil and gas and pipelines, Deloitte predicted: oil prices are down from recent highs, work is almost done on the LNG Canada terminal, and work is slowing on the Coastal GasLink and Trans Mountain pipeline projects.
However, BHP’s recent approval of an additional $6.4 billion in spending on its Jansen potash project in Saskatchewan will help offset the decline in pipeline investment, Deloitte said.
VICTORIA – British Columbia is forecasting a record budget deficit and a rising debt of almost $129 billion less than two weeks before the start of a provincial election campaign where economic stability and future progress are expected to be major issues.
Finance Minister Katrine Conroy, who has announced her retirement and will not seek re-election in the Oct. 19 vote, said Tuesday her final budget update as minister predicts a deficit of $8.9 billion, up $1.1 billion from a forecast she made earlier this year.
Conroy said she acknowledges “challenges” facing B.C., including three consecutive deficit budgets, but expected improved economic growth where the province will start to “turn a corner.”
The $8.9 billion deficit forecast for 2024-2025 is followed by annual deficit projections of $6.7 billion and $6.1 billion in 2026-2027, Conroy said at a news conference outlining the government’s first quarterly financial update.
Conroy said lower corporate income tax and natural resource revenues and the increased cost of fighting wildfires have had some of the largest impacts on the budget.
“I want to acknowledge the economic uncertainties,” she said. “While global inflation is showing signs of easing and we’ve seen cuts to the Bank of Canada interest rates, we know that the challenges are not over.”
Conroy said wildfire response costs are expected to total $886 million this year, more than $650 million higher than originally forecast.
Corporate income tax revenue is forecast to be $638 million lower as a result of federal government updates and natural resource revenues are down $299 million due to lower prices for natural gas, lumber and electricity, she said.
Debt-servicing costs are also forecast to be $344 million higher due to the larger debt balance, the current interest rate and accelerated borrowing to ensure services and capital projects are maintained through the province’s election period, said Conroy.
B.C.’s economic growth is expected to strengthen over the next three years, but the timing of a return to a balanced budget will fall to another minister, said Conroy, who was addressing what likely would be her last news conference as Minister of Finance.
The election is expected to be called on Sept. 21, with the vote set for Oct. 19.
“While we are a strong province, people are facing challenges,” she said. “We have never shied away from taking those challenges head on, because we want to keep British Columbians secure and help them build good lives now and for the long term. With the investments we’re making and the actions we’re taking to support people and build a stronger economy, we’ve started to turn a corner.”
Premier David Eby said before the fiscal forecast was released Tuesday that the New Democrat government remains committed to providing services and supports for people in British Columbia and cuts are not on his agenda.
Eby said people have been hurt by high interest costs and the province is facing budget pressures connected to low resource prices, high wildfire costs and struggling global economies.
The premier said that now is not the time to reduce supports and services for people.
Last month’s year-end report for the 2023-2024 budget saw the province post a budget deficit of $5.035 billion, down from the previous forecast of $5.9 billion.
Eby said he expects government financial priorities to become a major issue during the upcoming election, with the NDP pledging to continue to fund services and the B.C. Conservatives looking to make cuts.
This report by The Canadian Press was first published Sept. 10, 2024.
Note to readers: This is a corrected story. A previous version said the debt would be going up to more than $129 billion. In fact, it will be almost $129 billion.
The Canadian Press. All rights reserved.
NANAIMO, B.C. – Former Bank of Canada governor Mark Carney says he’ll be advising the Liberal party to flip some the challenges posed by an increasingly divided and dangerous world into an economic opportunity for Canada.
But he won’t say what his specific advice will be on economic issues that are politically divisive in Canada, like the carbon tax.
He presented his vision for the Liberals’ economic policy at the party’s caucus retreat in Nanaimo, B.C. today, after he agreed to help the party prepare for the next election as chair of a Liberal task force on economic growth.
Carney has been touted as a possible leadership contender to replace Justin Trudeau, who has said he has tried to coax Carney into politics for years.
Carney says if the prime minister asks him to do something he will do it to the best of his ability, but won’t elaborate on whether the new adviser role could lead to him adding his name to a ballot in the next election.
Finance Minister Chrystia Freeland says she has been taking advice from Carney for years, and that his new position won’t infringe on her role.
This report by The Canadian Press was first published Sept. 10, 2024.
The Canadian Press. All rights reserved.
HALIFAX – The Nova Scotia government has introduced a bill that would kick-start the province’s offshore wind industry without federal approval.
Natural Resources Minister Tory Rushton says amendments within a new omnibus bill introduced today will help ensure Nova Scotia meets its goal of launching a first call for offshore wind bids next year.
The province wants to offer project licences by 2030 to develop a total of five gigawatts of power from offshore wind.
Rushton says normally the province would wait for the federal government to adopt legislation establishing a wind industry off Canada’s East Coast, but that process has been “progressing slowly.”
Federal legislation that would enable the development of offshore wind farms in Nova Scotia and Newfoundland and Labrador has passed through the first and second reading in the Senate, and is currently under consideration in committee.
Rushton says the Nova Scotia bill mirrors the federal legislation and would prevent the province’s offshore wind industry from being held up in Ottawa.
This report by The Canadian Press was first published Sept. 10, 2024.
The Canadian Press. All rights reserved.
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