Posthaste: The coming recession will be a tale of housing versus commodities

financialpost.com:

How hard each province is hit by this year’s expected recession will depend on their relative exposures to the housing and commodities markets, saysone economist.

“Housing and other interest‑rate‑sensitive sectors will feel the coming economic downturn most acutely, whereas commodity producers will be less vulnerable,” Marc Desormeaux, principal economist at Desjardins Group, said in a report on Jan. 23. “We think this contrast will become starker in 2024.”

Montreal-based Desormeaux said Ontario and British Columbia — home to Canada’s two biggest housing markets — will take the largest economic hit, with each contracting 0.1 per cent in 2024, compared with growth in commodity-focused Alberta, Saskatchewan and Newfoundland and Labrador of 0.9 per cent, 0.7 per cent and 1.7 per cent, respectively.

Real estate accounted for about 20 per cent of total gross domestic product, according to Statistics Canada, but the sector has been struggling under the weight of higher interest rates.

Home sales fell 11.2 per cent in 2023 from 2022, according to the Canadian Real Estate Association, as higher interest rates cut into activity. CREA in its most recent housing report said “price declines have been predominantly located in Ontario markets … and to a lesser extent British Columbia.”

With real estate activity accounting for almost 13 per cent GDP in Ontario and almost 20 per cent in B.C., it’s no wonder Desormeaux predicts a tougher road ahead for those provinces until interest rates start to fall — something economists are forecasting for the middle of this year.

Meanwhile, the strong outlook for commodities, particularly oil, potash and uranium, are expected to provide economic cushions for Alberta, Saskatchewan and Newfoundland