Thunder Bay, ON – While inflation cools and interest rates fall, the Canadian economy is still struggling to find solid ground, according to a new report from the Conference Board of Canada. The organization predicts modest GDP growth of 1.1 per cent in 2024 and 1.7 per cent in 2025.
This slow recovery is attributed to several factors:
- Delayed Impact of Easing Inflation: While inflation is slowing, its lingering effects continue to weigh on consumer spending and business investment.
- Cautious Business Investment: Despite falling interest rates, businesses remain hesitant to invest due to past economic uncertainty. However, the report anticipates a surge in capital spending in 2025, particularly in the automotive and resource sectors.
- Weak Job Growth: High interest rates and weak business confidence have slowed job creation, leading to a rising unemployment rate. This trend is expected to continue into the last quarter of 2024.
- Housing Affordability Crisis: Although housing cost increases are projected to slow, affordability remains a major concern. Recent policy changes aimed at curbing immigration and boosting housing supply may offer some relief, but significant improvements are not expected.
Bright Spots on the Horizon:
The report highlights some positive developments:
- Stronger U.S. Economy: Despite recent slowdowns, the U.S. economy continues to perform well, which will benefit Canadian exports.
- Rebound in International Trade: Canada’s trade sector is expected to recover in the coming years, driven by increased demand from the U.S.
Risks and Uncertainties:
The upcoming U.S. election poses a significant risk to the economic outlook, with potential changes in tax and trade policies creating uncertainty.
Overall, the Conference Board of Canada paints a picture of a Canadian economy slowly emerging from a challenging period. While there are reasons for optimism, significant challenges remain, and the pace of recovery is expected to be gradual.
