Battery Low: Canada’s Three-Year Outlook: Conference Board of Canada

The Conference Board of Canada recently released its latest report called Battery Low: Canada's Three-Year Outlook.

Key findings from the report include:

• Interest rates are on their way up again, as inflation is not dead enough.
• Developments in applied artificial intelligence tools bring promise of improved future productivity, but with likely labour force adjustments in the coming quarters.
• A drawdown in inventories and a savings-depleted consumer sector will mean real output growth will turn negative in the final half of 2023, with a modest recovery beginning in early 2024.
• With positive export performance and constrained import demand, Canada’s trade sector will be the chief driver of real GDP growth in 2023.
• What spending growth we see from the consumer sector will be illusory, with it entirely fed by population growth. The unemployment rate is expected to rise.
• Housing market forces are in conflict. Short-term mortgage rate pressures, cyclical weakening, and building constraints are working against longer-term needs to increase the housing stock.?

"Canadian consumers kept a heavy foot on the pedal early this year, supporting spending on durables and keeping housing prices strong. With savings depleted and the Bank of Canada again riding the brakes, however, Canada’s economic batteries are getting depleted," said the report.

"Recession commentary often revolves around whether it will be a hard or soft landing, but slow motion may be a better way of describing prospects ahead. We see the performance of real household spending, which pushed up by a heady 5.7 per cent at annual rates in the first quarter, not as a sign of strength but rather as a surer indicator of an economic last gasp and a coming weakness. Interest rates had been thought to be high enough to temper consumers’ enthusiasm—but evidently not. The Bank of Canada renewed its push to increase the cost of borrowing, and more interest rate hikes are possibly in store if the economy doesn’t show more consistent signs of cooling.

"Canada’s outlook for the next three years reveals a lot in its anticipated composition by industry. The economy will be generally supported by commodities, healthcare, and sectors still on the bounce-back from the pandemic. We are reasonably bullish on non-residential construction, but formerly hot industries serving the consumer sector such as retail, professional services, financial services, and government will be a net drag on the economy, particularly over the next 24 months."

Mario Toneguzzi is Managing Editor of Canada’s Podcast. He has more than 40 years of experience as a daily newspaper writer, columnist, and editor. He was named in 2021 as one of the Top 10 Business Journalists in the World by PR News – the only Canadian to make the list)

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