The labour market has reached an inflection point, employment growth has stalled, and unemployment is set to rise.
Wage growth has given way to price pressure and is now accelerating. Ahead, weakening labour demand will draw steam from this ascent.
The consumer price index will grow by 7.0 per cent this year and 3.8 per cent next year. Rising wage pressures will hinder inflation’s return to the Bank of Canada’s target range.
Real household consumption spending will grow by 5.4 per cent in 2022 and 1.6 per cent in 2023.
Tighter monetary policy is discouraging the consumption of goods and services that are sensitive to interest rates. Spending on durable goods fell in the second quarter of 2022 and will fall further into 2023.
Real household spending on services reclaimed its pre-pandemic level in the second quarter of 2022. However, spending on transportation, recreation, and travel hasn’t fully bounced back.
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