Posthaste: These provinces have felt the most pain from Bank of Canada rate hikes
Looking back at the year the Bank of Canada started hiking interest rates, things looked pretty good.
Canada’s real gross domestic product grew 3.8 per cent in 2022, with GDP rising in nine provinces. Saskatchewan led the pack with 6 per cent growth, followed by Alberta, at 5 per cent, according to provincial numbers released last week by Statistics Canada.
But while growth looked good on the surface, Marc Desormeaux, principal economist at Desjardins, spots several “troubling details” in the data that showed the early impacts of the most aggressive interest-rate hiking cycle in recent history.
In an effort to curb soaring inflation after the pandemic, the Bank of Canada raised its policy interest rate from 0.25 to 4.25 per cent in 2022. Three more rate hikes in 2023 brought the rate to the current 5 per cent.
“We already knew how much of a drag housing posed at the national level last year as interest rates rose sharply, but the breadth of weakness and depth in some regions was striking,” said Desormeaux in a note.
After hitting record-highs in 2021, housing investment dropped 12.1 per cent in 2022, falling in seven provinces, a count only exceeded during severe recessions in the past, he said.
Residential capital’s share of economic output in 2022 was below the average of the decade before the pandemic everywhere except in the Maritimes.
In Ontario, Quebec and British Columbia, this investment fell by more than at any point since the 1990s.
In Ontario and B.C., the economies where the housing market holds the biggest sway, growth would have been over 5 per cent if it was not for the decline in real estate, said Desormeaux. As it was, 2022 GDP for Ontario came in at 3.9 per cent and 3.8 per cent for B.C.
Home sales in
Read more on financialpost.com
