On June 28, Canada may avoid a recession thanks to strong immigration and an upturn in the housing market, but growth will still disappoint, Stephen Brown and Olivia Cross of Capital Economics said.
They expect GDP to contract later this year, noting that below-potential growth and rising unemployment will ease inflationary pressures, allowing the core CPI to return to the central bank’s 2% target by mid-2024, which would allow the Bank of Canada to increase inflation next year. Interest rates fell to 3%.
While households have shown resilience so far, consumption will slow sharply as savings rates return to pre-pandemic levels and debt service costs rise.