This quarterly economic forecast provides highlights of the Canadian Outlook report, which presents the short-term national outlook.
Document Highlights
COVID’s most virulent wave yet is hindering Canada’s economic recovery. The response by governments and the general public will dampen activity in consumer services early in 2022.
The economy should return to its potential output by the beginning of 2023. But population aging and anemic growth in business investment will leave little fuel in the tank for 2024 and beyond.
High levels of consumer savings and government stimulus during the pandemic are still working their way through the system, but their effects are rapidly waning.
Supply chain issues and resulting inflationary pressures are lasting longer than expected, prompting central banks to speed up their timetables for rate hikes in 2022.
The party is over for housing. Higher borrowing rates and the hangover from exuberant spending in the past will pull new and resale housing markets back down to levels in line with their underlying demographic fundamentals.
Labour markets have largely recovered from the pandemic, although productivity is a concern. Unemployment rates will soon return to their pre-pandemic levels below 6.0 per cent, but skill mismatches and labour shortages are hurting potential output.
Net exports are a rare bright spot in our outlook. High levels of oil and gas production and faster and greater capacity to get these products to markets are helping. Geopolitical tensions and erratic trade policy south of the border pose risks, however.
Easing government stimulus measures and better-than-expected revenues are quickly paring government deficits. But accumulated government debt remains a long-term issue, particularly at the provincial level.
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