Persistent Inflation and High Interest Rates Slow Growth across Canadian Cities

Ottawa, December 7, 2023 — Canadian cities will experience slow growth for the remainder of 2023, as higher interest rates and persistent inflation erode consumer purchasing power and constrain local economies, according to new research from The Conference Board of Canada.

“Following Canada’s rebound from the pandemic, higher interest rates and stubborn inflation have started to ease consumer spending,” said Jane McIntyre, Principal Economist at The Conference Board of Canada. “We expect this economic slowdown to continue into 2024 across most cities but predict slight momentum gains in 2025.”

Edmonton’s real GDP growth will slow to 2.9 per cent in 2023, still outperforming all other major Canadian cities, before retreating to 1.8 per cent in 2024. Improvements in oil prices have stimulated the economy across Alberta, including Edmonton, the provincial capital. The city’s solid economy and affordable housing are attracting out of province homebuyers, accelerating population growth and housing sales, but also prompting faster price increases.
Global demand for several of Saskatchewan’s key resources remains strong, but significant declines in commodity prices will have spillover effects for Saskatoon. GDP is forecast to grow by 2.8 per cent in 2023, reflecting a drop from the previous year, yet keeping the city well above the provincial average. Projected growth for 2024 is 1.9 per cent.
Winnipeg’s manufacturing sector is set for expansion due to supply chain improvements and a new bus contract acquired by New Flyer. Ongoing construction of the CentrePort Canada rail park will also strengthen the city’s transportation and warehousing sectors. However, a minor economic slowdown is expected, with GDP forecast to increase 2.7 per cent in 2023 followed by a lesser 1.2 per cent in 2024.
With London’s tight labour market and consumers’ excess savings, households have remained confident in their spending on services, but higher interest rates are starting to take a toll. GDP growth is expected to be 2.7 per cent in 2023 before slowing to 1.1 per cent in 2024.
Job gains in the goods-producing industries will drive an employment surge in Moncton, although this uptick will be temporary. The cooling of consumer spending is leading to job losses in some sectors, while labour shortages plague others. Economic growth is forecasted to expand by 2.4 per cent in 2023, slowing dramatically to 0.6 per cent in 2024.
Unemployment is set to rise due to the impacts of higher interest rates, but Windsor’s overall outlook remains positive, largely due to the considerable number of investments the city has attracted. Growth in the city’s economy is projected to be 2.4 per cent in 2023 before moderating to 1.7 per cent in 2024.
Strong employment prospects and affordable housing prices are spurring Calgary’s local housing demand. GDP for the city is forecast to increase 2.3 per cent in 2023 and a further 2.1 per cent in 2024.
Thunder Bay’s $1.2 billion jail project will stimulate local job growth and support economic expansion. GDP is anticipated to rise to 2.0 per cent in 2023 and an additional 2.5 per cent in 2024.
Conditions for Saskatchewan’s resources are mixed, but a number of key commodity prices are softening. As the provincial capital, Regina will experience the effects of these conditions, which is anticipated to limit growth to 2.0 per cent in 2023 and 1.5 per cent in 2024.
Oshawa’s manufacturing sector, an economic staple, is poised for growth due to investments from General Motors and the provincial and federal governments that will support the city’s GM plant. GDP is projected to expand by 1.9 per cent in 2023 and 1.8 per cent in 2024.
As a result of the declining demand for goods, domestically and internationally, the biggest drag on Halifax’s growth will be the goods sector. GDP is expected to rise 1.8 per cent in 2023 before expanding a further 1.0 per cent in 2024.
Elevated net international migration in the St. Catharines-Niagara region will help support labour supply, however, labour shortages will persist. The region’s heavy dependence on the services sector will help shield it from a major downturn during the slowdown. GDP is forecast to grow 1.8 per cent in 2023, slowing to 1.3 per cent growth in 2024.
Declining consumer purchasing power and elevated borrowing costs for businesses will curtail short-term domestic demand and hinder growth in several of Kingson’s key sectors. The city’s real GDP growth is expected to be 1.7 per cent in 2023 and 1.0 per cent in 2024.
Kitchener-Cambridge-Waterloo’s anticipated employment gains in 2024 are expected to outpace the increase in the labour force, but rising interest rates and a recession threat will limit GDP growth to 1.7 per cent in 2023 and 1.5 per cent in 2024.
Despite improvements in supply side issues, cooling domestic and international demand will dampen short-term growth in Toronto’s manufacturing sector. GDP is forecast to expand by 1.5 per cent in 2023 and 1.3 per cent in 2024.
Employment growth in Guelph remains positive, but slower job gains will lead to a spike in unemployment in the region. GDP is forecast to advance 1.5 per cent in 2023 and 1.2 per cent in 2024.
Weak housing demand is hindering growth in Montreal’s finance, insurance, and real estate, the city’s largest sector. Output from the manufacturing sector is also expected to slow, as high prices lower demand for goods and rising interest rates discourage investments. The city’s GDP is forecast to expand 1.4 per cent in 2023 and a further 0.7 per cent in 2024.
Households in Ottawa-Gatineau are better prepared to handle rising interest rates and persistent inflation due to the region’s high incomes relative to other Canadian cities. Still, GDP growth is forecast to slow to a modest 1.3 per cent in 2023 and 1.1 per cent in 2024.
Tightening household finances, impacted by higher costs of consumer essentials, are curbing short-term consumer spending, which is hurting output from Vancouver’s retail trade sector. The city’s real GDP will increase by 1.2 per cent in 2023 and 1.5 per cent in 2024, largely due to growth in the services-producing industry.
Minimal output advancement in Hamilton’s goods sector has been a major constraint on the city’s overall economic growth, contributing to a 0.9 per cent increase in real GDP for 2023. While still modest, economic growth will reach 1.6 per cent in 2024.
Even with strong net international migration, Victoria’s labour force is expected to decline. Inflation and high interest rates are dragging on the local economy, which is forecasted to expand by 0.9 per cent in 2023 followed by 1.4 per cent in 2024.
High interest rates are impacting Greater Sudbury’s real estate activity, new home construction, and consumer spending, lowering the region’s real GDP growth to just 0.3 per cent in 2023. However, mining investments and strong population growth are expected to boost GDP growth to 1.2 per cent in 2024.
A host of challenges, including high interest rates, reduced consumer spending, and labour shortages will limit Québec City’s GDP growth to just 0.1 per cent in 2023. The local economy will come to a standstill in 2024.
With ongoing challenges in the province’s oil and gas industry, no growth is expected for St. John’s in 2023. However, as the province’s offshore oil industry rebounds, growth in the local economy will pick up to 1.8 per cent in 2024.