Navigating the Tide: Canada's Economic Outlook in 2024 | Canada News Media
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Navigating the Tide: Canada’s Economic Outlook in 2024

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Canada's Economic Outlook in 2024

As Canada moves into 2024, the economy is navigating through a critical transition shaped by the Bank of Canada’s aggressive measures to tame inflation. These efforts have stabilized the key interest rate at 5%, leading to a nuanced economic landscape.

While this has impacted consumer spending and business investments, it has also created favourable conditions for everyday traders. With the advent of online trading accounts, Canadians can engage in financial markets more actively, benefiting from these economic shifts.

This economic recalibration, although challenging for lower-income households facing increased living costs, is gradually controlling inflation. Global factors like easing price pressures and resolving supply chain issues contribute to this balance. However, the effects vary across different societal sectors, with some benefiting more than others.

In 2024, many Canadians will likely face higher mortgage renewals, necessitating careful financial planning. The economy may experience mild recessionary pressures in the first half, with unemployment peaking at 7.0% and slower wage growth. Despite these challenges, there’s a sense of cautious optimism for a gradual recovery and growth in the latter part of the year.

The Bank of Canada’s role remains crucial in steering the nation through these uncertain times, with its policies playing a pivotal role in shaping a stable economic future.

Year GDP Growth (%) Unemployment Rate (Peak) Interest Rate (%) Inflation Rate (%) Key Economic Trends
2023 1.1 N/A 5.0 N/A Strong population growth, 430,000 jobs created, uneven growth with housing slowdown.
2024 0.9 7.0 Expected Decrease in Summer 2024 2 to 3 Slight lower growth, possible mild recession, improvement in second half.

2023 saw a GDP growth of 1.1%, slightly lower than the economy’s potential but higher than initial forecasts. This was largely due to strong population growth fueling demand and supporting the labour market, with approximately 430,000 jobs created. The Bank of Canada’s response to this resilience was to increase the key interest rate to 5.0%.

Looking ahead to 2024, the forecast predicts a modest GDP growth of 0.9%. The economy is expected to avoid a recession, but growth will remain limited due to the ongoing impact of high-interest rates. The unemployment rate is anticipated to peak at 7.0%, and an interest rate decrease is expected by the summer of 2024. The inflation rate is projected to be between 2% and 3%, indicating a stabilization compared to previous years.

These figures reflect a period of transition and adjustment as Canada navigates through economic uncertainties and works towards a more stable and predictable environment. In 2024, Canada’s economic landscape is set to undergo a notable shift, particularly in terms of inflation and monetary policy:

Inflation Trends

Historically, Canada’s inflation rate has been fairly stable, averaging around 2% annually. However, in contrast to the high inflation periods of the 1970s and 1980s, 2024 expects a gradual decrease in inflation, with projections placing it between 2% and 3%. This rate is slightly above the usual target but represents a stabilization from the more volatile rates of recent years.

Sector-Specific Inflation

Certain sectors, like food and housing, will continue to see above-average inflation rates. Food prices are anticipated to increase by 4-5% due to global market influences and the Canadian dollar’s position. Similarly, housing costs, encompassing rent and mortgage interest, are expected to escalate beyond the Bank of Canada’s 2% inflation target, especially in the first half of the year.

Monetary Policy Outlook

  • The Bank of Canada is set to ease off on the aggressive interest rate hikes that marked the past 40 years, bringing more predictability to the financial environment.
  • A reduction in the key rate is expected by summer 2024, although it’s unlikely to reach the neutral level of 2.5% before 2025.
  • The central bank’s policy rate and inflation trends indicate that while rates will remain elevated compared to the past 15 years, they will begin to align more closely with current inflation levels.

As Canada moves into 2024, the economic focus will be on managing these inflationary trends and adapting to the evolving monetary policy, with a keen eye on sectors that might continue to experience higher inflation rates.

Ultimately, 2024 will be a testament to Canada’s enduring spirit of innovation and collaboration, as it navigates through these changing economic tides to emerge stronger and more prosperous.

 

Economy

Canada’s unemployment rate holds steady at 6.5% in October, economy adds 15,000 jobs

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OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.

Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.

Business, building and support services saw the largest gain in employment.

Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.

Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.

Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.

Friday’s report also shed some light on the financial health of households.

According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.

That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.

People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.

That compares with just under a quarter of those living in an owned home by a household member.

Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.

That compares with about three in 10 more established immigrants and one in four of people born in Canada.

This report by The Canadian Press was first published Nov. 8, 2024.

The Canadian Press. All rights reserved.

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Health-care spending expected to outpace economy and reach $372 billion in 2024: CIHI

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The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.

The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.

CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.

This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.

While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.

Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.

The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.

This report by The Canadian Press was first published Nov. 7, 2024.

Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.

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Trump’s victory sparks concerns over ripple effect on Canadian economy

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As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.

Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.

A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.

More than 77 per cent of Canadian exports go to the U.S.

Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.

“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.

“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”

American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.

It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.

“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.

“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”

A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.

Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.

“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.

Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.

With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”

“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.

“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”

This report by The Canadian Press was first published Nov. 6, 2024.

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