KITCHENER — Waterloo Region’s economy will avoid a recession in 2023 and outpace provincial economic activity for the year, according to a new report.
The Conference Board of Canada, an Ottawa-based think-tank, released its annual economic projections for the region this week, predicting a slowdown in the economy mostly due to national challenges including rising interest rates, a cooling housing market and the threat of a Canadian recession.
But while the region’s output is slowing, it is still expected to outpace the provincial economy.
After a red-hot 2021 and 2022, the region’s gross domestic product growth is expected to slow to 1.5 per cent in 2023, jumping back up to 3.5 per cent in 2024 and 2.4 per cent in 2025.
That’s above the projections for Ontario, with the provincial government forecasting growth around 0.5 per cent in 2023, 1.6 per cent in 2024 and 2.1 per cent in 2025.
Over the last two decades, the region has been one of the province’s economic engines, with its economy expanding faster than the province’s in 18 of the last 21 years.
“It isn’t a surprise to me that Kitchener and surrounding area is expected to outpace the provincial economy throughout our forecast,” said Robin Wiebe, an economist with the conference board who is originally from Kitchener. “It is a vibrant community with an economy with multiple sectors, and it has a history — at least over the last 21 years — of outperforming the province.”
The regional government also has a favourable projection for the area, with spokesperson Scott Cressman noting the low industrial vacancy rate, steady construction activity, and ability to draw workforce talent as reasons for optimism.
“The Region of Waterloo’s diversified economy has allowed for ongoing growth in the Waterloo Region, enabling us to be fairly optimistic about the projection,” said Cressman.
Manufacturing, which makes up 18 per cent of the region’s economy, is expected to return to pre-pandemic levels by 2024.
And while tech layoffs may temporarily hinder the region’s tech sector, continued unfilled job openings should mean local laid-off employees can quickly find new work.
“I think what this reporting is highlighting is the importance of our diverse economy,” said Art Sinclair, vice-president of the Greater Kitchener Waterloo Chamber of Commerce.
“After the early impact of the pandemic, what we’re seeing is we’re moving back to original pre-pandemic conditions, where we were a consistent economic driver of the province.”
Despite a potential slowdown in the year ahead, Sinclair said a top concern for local employers remains finding workers.
The region’s unemployment rate stood at 5.5 per cent in 2022, down considerably from 9.6 per cent in 2020 and 6.5 per cent in 2021.
It is expected to reach about 5.8 per cent in 2023.
But the report highlights other possible headwinds that could limit the projected growth for the region.
Real estate prices are forecast to continue dropping in 2023 after the frenzy between 2020 and 2022.
“That could be made worse if there is a change in direction with Toronto companies and their work-from-home models,” said Wiebe. “If there is a mass return to the office in Toronto, that could put an end to the large amounts of people fleeing the city, and cause prices to drop even further.”
The region also continues to take in a large share of new immigrants, he said, expected to fuel the region’s growth over the next three years. He expects the population will grow by 2.4 per cent in 2023, followed by 1.8 per cent in 2024 and 1.7 per cent in 2025.
“I think the one area for concern for the region is that it likely can’t keep growing forever without having some hiccups,” said Wiebe.
“They likely won’t be able to build housing quick enough to meet the population demands, and there’s also the impact on existing infrastructure and services from these increased numbers.”
There’s also one other major consideration that could upend all future regional projections.
If the country moves into a full-blown recession, he said, the region will not be immune, and the conversation could soon turn from one of optimism to one of desperation.
Key Waterloo Region economic projections:
The population will grow by 2.4 per cent in 2023, 1.8 per cent in 2024 and 1.7 per cent in 2025.
The local GDP grew by a 21-year high of 5.1 per cent in 2021 and expanded a further four per cent in 2022.
Forecasts indicate local GDP growth of 1.5 per cent in 2023, 3.5 per cent in 2024 and 2.4 per cent in 2025.
The unemployment rate will increase to 5.8 per cent in 2023 from 5.5 per cent in 2022. Both are down considerably from 9.6 per cent in 2020 and 6.5 per cent in 2021.
For all of 2022, employment rose by 10,700 jobs — an increase of 3.3 per cent — to a record 332,140. This followed a 2021 increase of 15,250 jobs, or five per cent.
Overall employment is expected to increase by one per cent in 2023, led by gains of 4,250 jobs in finance, insurance, and real estate; and 3,300 jobs in manufacturing.
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.
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.
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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