Preliminary data from Statistics Canada suggests that the Canadian economy might have entered a technical recession as high interest rates negatively impact consumer spending. Early estimates indicate the arrival of a Canadian recession in early 2024.
Canada’s economy is expected to continue facing challenges due to increased borrowing rates, which will likely cause growth to peak in the first half of the next year. Oxford Economics predicts that the Canadian recession will last until the second quarter of 2024, with a 1.1% peak to trough decrease in the country’s gross domestic product (GDP). According to Oxford, the recession began in the third quarter of 2023.
To learn more about the impending recession in Canada, continue reading this article for further insights.
Contents
What is meant by Recession?
Technically, a recession is defined as two consecutive quarters of negative growth; however, most analysts prefer to see broader-based weakness before classifying a downturn as a recession. It can also be described as a prolonged period of low or negative real GDP growth coupled with a significant increase in the unemployment rate.
A recession is a significant, pervasive, and prolonged decline in economic activity. Economists measure the duration of a recession from the peak of the previous expansion to the trough of the downturn. While a recession may last only a few months, it could take years for the economy to recover to its previous level.
Recession in Canada Details
| Post Title | Recession in Canada is Coming in Early 2024 |
|---|---|
| Country | Canada |
| Expected GDP Decrease Percent | 1.1% |
| More Readings | [Present Here] |
All We Know About Canada’s Economy Change
Canada’s economy is expected to continue facing difficulties due to increased borrowing rates, which will cause growth to peak in the first half of the next year. However, as interest rates begin to decline, economic activity should pick up in the second half.
In 2024, we project a modest 0.9% increase in Canada’s real GDP, with a couple of quarters of negative growth in the first part of the year. Other economists are less optimistic, predicting no growth at all. Capital Economics forecasts a 0.2% GDP shrinkage in the fourth quarter and a 1% decline in the first quarter of 2024.
Canada’s inflation rate has consistently increased by around 2% annually over the past 30 years. However, during the 1970s and 1980s, price increases were more volatile, averaging 8% and sometimes reaching 13%. It is anticipated that consumer spending will be particularly tight in the first half of 2024, falling below 1%.
Food price inflation is expected to remain between 4% and 5% in the coming months. Food is often traded on international markets, and the depreciation of the Canadian dollar will contribute to rising costs. Additionally, housing-related expenses—such as rent and mortgage interest—will continue to increase faster than the Bank of Canada’s 2% inflation target.
Future Predictions
Preliminary GDP estimates from Statistics Canada suggest that the Canadian economy may have entered a technical recession. The analysis indicates that the economy will continue to struggle with high interest rates, inflation, forest fires, and drought conditions into early 2024.
With this decision, the Bank of Canada has decided to keep its main interest rate at 5%. High interest rates are expected to further restrain economic growth, particularly as more people refinance their mortgages at higher rates. According to a recent Bank of Canada prediction, economic growth will remain weak until mid-2024.
Oxford Economics projects that the economic slowdown in 2024 will result in a 1.2% decrease in overall government income. Meanwhile, government expenditure is predicted to rise by 4.4% due to increased unemployment, social assistance, and debt payments. This could lead to a $66 billion deficit this year, compared to a $2.2 billion surplus in 2023.
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