Economy

Rates may have peaked, but economy remains fragile

Published

2 years ago

February 2, 2023

The immediate recession should be milder and shorter than previously expected, as energy prices fall, and interest rates do not rise as high as previously expected.

That picture is reinforced by the Bank’s decision while raising official interest rates to 4%, to remove hints that they might go much higher. For the first time in this series of 10 consecutive rises, the language suggests that the job might be done, or very nearly done.

Further rate rises are no longer presumed. The peak in interest rates could be imminent.

While this is still consistent with the energy shock recession lasting through this year and into next, it is far shallower and does not last as long as the two-year downturn previously predicted.

But on the other side, the recovery out of this downturn in the next few years is expected to be very sluggish indeed.

The Bank assesses that Brexit, the pandemic and the energy shock has led to an enduring hit to the economy. The workforce has not returned to its pre-pandemic size, unlike other major economies. This is mainly down to early retirements and therefore is likely to prove permanent. Fewer EU workers in key sectors suffering shortages also plays a part.

The Bank has also reassessed post-Brexit goods trade data, and concluded that the hit is notably more than suggested by official data. It believes that the expected fall in UK productivity after Brexit “might have occurred more quickly than previously assumed”.

In addition business investment – the key to boosting the economy in the long term – remains “very subdued” well below pre-referendum levels, hit by both Brexit and the pandemic.

Throw that all together and an economy that is still smaller now than it was before the pandemic and Brexit, might not exceed that size until early 2026, according to this new analysis. The promised “roaring” 2020s is looking more like a lost half-decade at least.

So the good news is that the immediate shock should be milder, with inflation, energy prices and interest rates higher than they were, yes, but now on a lower path than previously expected. But the shocks have left an enduring mark on the economy.

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Economy

PBO projects deficit exceeded Liberals’ $40B pledge, economy to rebound in 2025

Published

7 hours ago

October 17, 2024

Anne Joseph

OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.

However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.

The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.

Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.

The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.

The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.

This report by The Canadian Press was first published Oct. 17, 2024.

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Economy

Statistics Canada says levels of food insecurity rose in 2022

Published

1 day ago

October 16, 2024

Anne Joseph

OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.

In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.

The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.

Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.

In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.

It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.

This report by The Canadian Press was first published Oct 16, 2024.

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Economy

Statistics Canada says manufacturing sales fell 1.3% to $69.4B in August

Published

1 day ago

October 16, 2024

Anne Joseph

OTTAWA – Statistics Canada says manufacturing sales in August fell to their lowest level since January 2022 as sales in the primary metal and petroleum and coal product subsectors fell.

The agency says manufacturing sales fell 1.3 per cent to $69.4 billion in August, after rising 1.1 per cent in July.

The drop came as sales in the primary metal subsector dropped 6.4 per cent to $5.3 billion in August, on lower prices and lower volumes.

Sales in the petroleum and coal product subsector fell 3.7 per cent to $7.8 billion in August on lower prices.

Meanwhile, sales of aerospace products and parts rose 7.3 per cent to $2.7 billion in August and wood product sales increased 3.8 per cent to $3.1 billion.

Overall manufacturing sales in constant dollars fell 0.8 per cent in August.

This report by The Canadian Press was first published Oct. 16, 2024.

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