Posthaste: Worst is yet to come for Canada's economy

financialpost.com:

With all this talk of Goldilocks lately, you might think the economy is out of the woods.

Not quite yet.

The world’s central banks appear to be ending their particularly aggressive interest-rate hiking cycle and there’s a new optimism in the air. The global economy, especially the United States, stormed past expectations this year, with U.S. growth hitting 2.4 per cent, up from 1.9 per cent last year.

But until those central banks actually start cutting, higher interest rates are still around and promise more pain to come — especially for Canada, say economists.

While the U.S. might get off with a soft landing, Canada, with its high household debt and dependence on the housing market, likely won’t be so lucky.

“Recession risks are higher north of the border, with a bumpier landing in store,” said Toronto Dominion economists led by Beata Caranci.

Canada’s growth will hit a low point in the first half of next year as the drag of higher borrowing costs continue to pull on the economy.

“Cushy soft is not how we would describe Canada’s outlook, which is clearly bumpier due to a more exposed consumer,” said Bank of Montreal’s chief economist Douglas Porter.

“Famously strong population growth of now nearly 3 per cent is papering over an even rockier performance on the ground, while also pressuring shelter costs and pushing up the jobless rate.”

Consumer belt tightening is expected to reach a peak in the first half of the new year, slowing spending to below 1 per cent, said TD.

With businesses also pulling back, it expects growth to slow to 1.1 per cent this year from 3.8 per cent in 2022, and then hit its trough at 0.5 per cent in 2024.

“This leaves a very narrow margin for error and recession risks are elevated,” said TD.

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