As we head into 2023, many economists have said Canada should brace for at least a mild recession amid high inflation and aggressive rate hikes from the Bank of Canada.
Economists at RBC forecast in October that Canada could enter a “moderate” recession in the first quarter of 2023. Similarly, in the fall economic statement, the federal government presented a “downside scenario” that would see a “mild recession” in Q1.
Here are some of the indicators that can offer a glimpse into whether Canada could jump into a recession, and what an economic downturn could look like if it does.
INFLATION
Economists say inflation data is one of the key metrics that will determine whether Canada enters a recession. Higher inflation rates would force the Bank of Canada to deliver larger interest rate hikes aimed at slowing down the economy.
“Demand is outstripping available supply on the consumer side, and that’s pushing up inflation. And so the Bank of Canada has been pretty clear that the economy needs to slow in order to get inflation under control,” Nathan Janzen, a senior economist with RBC Economics, told CTVNews.ca over the phone.
Data from Statistics Canada has shown that year-over-year inflation has indeed been creeping down each month after peaking at 8.1 per cent in June.
However, much of this decline can be attributed to falling fuel prices, and the Bank of Canada has signalled that it’s not done with rate hikes.
The food inflation rate was 11.4 per cent in September, the highest it’s been since 1981. Meanwhile, core inflation, which excludes food and energy, has continued to hover around 5.3 per cent and 5.5 per cent since June.
GDP GROWTH
Two negative quarters of GDP growth has been a working definition for a technical recession that’s often been used in the media, but economists say it’s not clear cut on how an actual recession is defined.
“There is no mechanical definition of a recession. A recession is a ‘significant’ decline in economic activity that is spread across the economy lasting more than a few months,” University of Calgary economics professor Trevor Tombe told CTVNews.ca. “That’s something where there’s judgement calls involved.”
The determination of whether our economy is in a recession is up to the C.D. Howe Institute’s Business Cycle Council, which involves a group of economists who meet each year, or when the start or end of a recession is likely near. Similarly in the U.S., recessions are determined by the National Bureau of Economic Research’s Business Cycle Dating Committee.
But GDP doesn’t tell the whole story. Last summer, the U.S. reported two consecutive quarters of economic growth, but Treasury Secretary Janet Yellen insisted the country was not in a recession, given the strong job numbers. The Business Cycle Dating Committee also made no declaration of a recession at the time.
The severity of a recession can also depend on how steep the decline in GDP is.
“Of course, it can decline by 0.1 per cent or it can decline by one or two per cent. So a recession can be very mild or it can be very deep,” Peter Dungan, an economics professor at the University of Toronto’s Rotman School of Business, told CTVNews.ca.
Even if Canada’s GDP doesn’t decline, slower growth can still spell bad news for the economy.
“The magic number is not zero,” Dungan added. “In a country like Canada we would expect, on a year-over-year basis, two per cent growth. So if you have even one per cent growth, that’s what people sometimes call a ‘growth recession.’ And it’s likely to be one in which the unemployment rate would start to tick up.”
UNEMPLOYMENT
High levels of unemployment are typical hallmarks of a recession. Yet, Canada’s job market has been red hot over the past year, with more open positions than workers available to fill them.
In October 2022, Canada’s unemployment rate was 5.2 per cent according to Statistics Canada, slightly higher than the record low of 4.9 per cent in July and August.
But in the event of an economic downturn, experts say the unfilled jobs would be the first to disappear before unemployment starts to creep up.
“Those will be the ones that start to disappear first as opposed to people actually losing jobs, which is great, because that means the unemployment rate doesn’t have to go up as much,” said Dungan.”
BMO said in a report published Nov. 7 it expects unemployment in Canada to reach 6.5 per cent next year as a result of a “shallow recession.” RBC expects Canada’s unemployment rate to increase by 1.7 percentage points in 2023 to nearly seven per cent and says lower-income Canadians will be harder hit.
“That is a significant increase. It’ll cause hardship for some households, but would rank historically speaking on the moderate end of recessions,” Janzen said, while noting that these projected unemployment levels are still much lower than the levels seen during the 2008 financial crisis.
OIL PRICES
The uncertainty brought upon by Russia’s invasion of Ukraine sent oil prices skyrocketing, with gas prices in some communities in Canada peaking at over $2 per litre last summer.
But high oil prices have usually been good news for the Canadian economy, given that Canada is the fourth largest oil exporter.
“High oil prices are normally a positive for the Canadian economy as a whole. I still think that all the evidence suggests that they are, but not all provinces,” Tombe said.
In 2015, Canada experienced a mild downturn short of a recession after oil prices plummeted, as it resulted in the cancellation of several investment projects in the oilsands.
But Dungan believes lower oil prices now spell more good news than bad, given the relative lack of oilsands investments at risk of cancellation and the impact that oil prices have on inflation.
“What a lower oil price will do around the world, both in Canada and around the world, is take the heat off the inflation. This means the central banks don’t have to raise their interest rates as much, which means that that would relieve that direction in going towards a recession,” he said.
HOUSING MARKET AND CONSUMER SPENDING
After the Bank of Canada began raising interest rates, housing prices across much of Canada saw steep declines from their peaks. According to the Canadian Mortgage and Housing Corporation, average home prices had fallen 15.6 per cent across Canada from February to August.
This has translated to a huge loss in wealth for Canadian households. An RBC report published in late October said $900 billion had been lost as a result of this housing market correction and expects losses to net wealth to peak at $1.6 trillion.
As a result, RBC expects the decline in wealth to cut into consumer spending, which could decline by $15 billion in 2023.
“We’ve already seen (softening) in the housing market, but the next sector to see some softening could be the manufacturing sector. We’ve seen already a pretty big slowdown in consumption of physical merchandise, particularly in the United States, from really high levels earlier in the pandemic,” Janzen said.
Consumer spending will also likely take a hit thanks to inflation. The Bank of Canada’s consumer expectations survey in October found that consumer confidence was declining and many Canadians plan on cutting spending to deal with high inflation. For this year’s holiday season, Deloitte Canada said it expects spending to fall 17 per cent.
VANCOUVER – Supervised injection sites are saving the lives of drug users everyday, but the same support is not being offered to people who inhale illicit drugs, the head of the BC Centre for Excellence in HIV/AIDS says.
Dr. Julio Montaner said the construction of Vancouver’s first indoor supervised site for people who inhale drugs comes as the percentage of people who die from smoking drugs continues to climb.
The location in the Downtown Eastside at the Hope to Health Research and Innovation Centre was unveiled Wednesday after construction was complete, and Montaner said people could start using the specialized rooms in a matter of weeks after final approvals from the city and federal government.
“If we don’t create mechanisms for these individuals to be able to use safely and engage with the medical system, and generate points of entry into the medical system, we will never be able to solve the problem,” he said.
“Now, I’m not here to tell you that we will fix it tomorrow, but denying it or ignoring it, or throw it under the bus, or under the carpet is no way to fix it, so we need to take proactive action.”
Nearly two-thirds of overdose deaths in British Columbia in 2023 came after smoking illicit drugs, yet only 40 per cent of supervised consumption sites in the province offer a safe place to smoke, often outdoors, in a tent.
The centre has been running a supervised injection site for years which sees more than a thousand people monthly and last month resuscitated five people who were overdosing.
The new facilities offer indoor, individual, negative-pressure rooms that allow fresh air to circulate and can clear out smoke in 30 to 60 seconds while users are monitored by trained nurses.
Advocates calling for more supervised inhalation sites have previously said the rules for setting up sites are overly complicated at a time when the province is facing an overdose crisis.
More than 15,000 people have died of overdoses since the public health emergency was declared in B.C. in April 2016.
Kate Salters, a senior researcher at the centre, said they worked with mechanical and chemical engineers to make sure the site is up to code and abidies by the highest standard of occupational health and safety.
“This is just another tool in our tool box to make sure that we’re offering life-saving services to those who are using drugs,” she said.
Montaner acknowledged the process to get the site up and running took “an inordinate amount of time,” but said the centre worked hard to follow all regulations.
“We feel that doing this right, with appropriate scientific background, in a medically supervised environment, etc, etc, allows us to derive the data that ultimately will be sufficiently convincing for not just our leaders, but also the leaders across the country and across the world, to embrace the strategies that we are trying to develop.” he said.
Montaner said building the facility was possible thanks to a single $4-million donation from a longtime supporter.
Construction finished with less than a week before the launch of the next provincial election campaign and within a year of the next federal election.
Montaner said he is concerned about “some of the things that have been said publicly by some of the political leaders in the province and in the country.”
“We want to bring awareness to the people that this is a serious undertaking. This is a very massive investment, and we need to protect it for the benefit of people who are unfortunately drug dependent.” he said.
This report by The Canadian Press was first published Sept. 18, 2024.
FREDERICTON – The six chiefs of the Wolastoqey Nation in New Brunswick distributed a survey on Indigenous issues to political parties ahead of the provincial election, which is scheduled to kick off Thursday. Here are some of the answers from the Progressive Conservative, Liberal and Green parties.
Q: How does your party plan to demonstrate a renewed commitment to recognizing our joint treaty responsibilities and acknowledging that the lands and waters of this territory remain unceded?
Progressive Conservative: The party respectfully disagrees with the assertion that land title has been unceded. This is a legal question that has not been determined by the courts.
Liberal: When we form government, the first conversations the premier-designate will have is with First Nations leaders. We will publicly and explicitly acknowledge your treaty rights, and our joint responsibility as treaty people.
Green: The Green Party acknowledges that New Brunswick is situated on the unceded and unsurrendered territories of the Wolastoqiyik, Mi’kmaq and Peskotomuhkati peoples, covered by the Treaties of Peace and Friendship. Our party is committed to establishing true nation-to-nation relationships with First Nations, grounded in mutual respect and co-operation as the treaties intended.
Q: How does your party propose to approach the issue of provincial tax agreements with First Nations?
Progressive Conservative: The government of New Brunswick operates in a balanced and fair manner with all organizations, institutions and local governments that represent the citizens of this province, including First Nations. Therefore, we cannot offer tax agreements that do not demonstrate a benefit to all citizens.
Liberal: Recent discussions with First Nations chiefs shed light on the gaps that existed in the previous provincial tax agreements with First Nations. Our party is committed to negotiating and establishing new tax agreements with First Nations that address the local needs and priorities and ensure all parties have a fair deal.
Green: The Green Party is committed to fostering a respectful relationship with First Nations in New Brunswick and strongly opposes Premier Blaine Higgs’s decision to end tax-sharing agreements. We believe reinstating these agreements is crucial for supporting the economic development and job creation in First Nation communities.
Q: How will your party ensure more meaningful participation of Indigenous communities in provincial land use and resource management decision-making?
Progressive Conservative: The government of New Brunswick has invested significant resources in developing a robust duty to consult and engagement process. We are interested in fully involving First Nations in the development of natural resources, including natural gas development. We believe that the development of natural gas is better for the environment — because it allows for the shutdown of coal-fired power plants all over the globe — and it allows for a meaningful step along the path to reconciliation.
Liberal: Our party is focused on building strong relations with First Nations and their representatives based on mutual respect and a nation-to-nation relationship, with a shared understanding of treaty obligations and a recognition of your rights. This includes having First Nations at the table and engaged on all files, including land-use and resource management.
Green: We will develop a new Crown lands management framework with First Nations, focusing on shared management that respects the Peace and Friendship Treaties. We will enhance consultation by developing parameters for meaningful consultation with First Nations that will include a dispute resolution mechanism, so the courts become the last resort, not the default in the face of disagreements.
This report by The Canadian Press was first published Sept. 18, 2024.
ST. JOHN’S, N.L. – A crew member of a Canadian Coast Guard ship has been lost at sea off southern Newfoundland.
The agency said in a release Wednesday that an extensive search and rescue effort for the man was ended Tuesday evening.
He was reported missing on Monday morning when the CCGS Vincent Massey arrived in St. John’s, N.L.
The coast guard says there was an “immediate” search on the vessel for the crew member and when he wasn’t located the sea and air search began.
Wednesday’s announcement said the agency was “devastated to confirm” the crew member had been lost at sea, adding that decisions to end searches are “never taken lightly.”
The coast guard says the employee was last seen on board Sunday evening as the vessel sailed along the northeast coast of Newfoundland.
Spokeswoman Kariane Charron says no other details are being provided at this time and that the RCMP will be investigating the matter as a missing person case.
This report by The Canadian Press was first published Sept. 18, 2024.
