Posthaste: Why these economists think Canada's downturn will be worse than other advanced nations
Could Canada already be in a recession?
Some economists think so.
“Whereas the [Bank of Canada] BoC has underplayed the Q3 GDP contraction and still anticipates a soft landing, we believe the economy has already slipped into a recession,” said the team at Oxford Economics led by Tony Stillo.
“Four key themes will shape the economy’s performance in 2024, which we expect will be well below the consensus view and worse than other advanced economies.”
The first theme is a moderate recession followed by a muted recovery.
Oxford believes the recession started in Canada in the third quarter of 2023 and will continue until the second quarter of 2024, resulting in a 1.1 per cent peak to trough decline in gross domestic product.
Economic activity will continue to contract through the mid-year as mounting mortgage renewals push up debt service costs, forcing consumers to pull back on spending.
The housing correction, now in its fifth quarter in a row, will continue as highly indebted households are forced to deleverage. Oxford predicts another 5 to 10 per cent drop in home prices by mid 2024, bringing the overall correction to a 22 per cent decline from the peak in February 2022.
Businesses will struggle during the first half of the year as profits are hit by reduced demand and tighter credit conditions depress capital investment and hiring plans. At the same time a slowdown in the United States will hurt Canadian exports which are not expected to return to pre-recession levels until 2025, they said.
The second theme that Oxford identifies is population growth. With another 1.5 million new arrivals expected over the next two years, the labour supply will grow but the boost to actual economic activity will be gradual. Thus supply
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