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As of August 2024, the question of whether Canada is in a recession remains a topic of debate among economists and policymakers. While some indicators suggest a potential downturn, others point to a resilient economy.
Key Economic Indicators
To assess Canada’s economic health, it’s essential to examine key indicators:
- GDP Growth: A decline in Gross Domestic Product (GDP) for two consecutive quarters is a common definition of a recession. While Canada’s GDP has shown signs of slowing, it hasn’t yet reached this threshold and thus, some argue that we will see a stronger economy as we head towards 2025 and an overall recovery from the covid-19 pandemic conditions.
- Unemployment Rate: The unemployment rate has remained relatively low, suggesting a strong labor market. However, job growth has been slower than in previous years and many businesses are struggling to find hard working, reliable employees.
- Inflation: High inflation rates can strain household budgets and businesses and we are seeing high numbers on grocery shelves at the pump and just about anywhere else you can spend a dollar (or twenty!) these days. While inflation has been easing, it remains above the central bank’s target and the impact to households is felt in every sector.
- Consumer and Business Confidence: Surveys of consumer and business confidence can provide insights into future economic activity and both have shown mixed signals, which we see reflected in a somewhat stale real estate market over the last few weeks, but seasonal variation accounts for some of that stagnation.
Looking Ahead to September
As we enter September 2024, several factors could influence Canada’s economic outlook:
- Interest Rate Decisions: The Bank of Canada’s decisions on interest rates will play a crucial role, if rates continue to rise to combat inflation, it could further slow economic growth, but there are many out there who are predicting a third, consecutive rate drop for Canadian interest rates, which may push buyer confidence in the active direction.
- Global Economic Conditions: The global economy is facing challenges, including geopolitical tensions and supply chain disruptions. These factors could impact Canada’s exports and investment, which we are already seeing with some of the railway strikes taking place now that impact millions and dollars worth of goods and materials that service our daily consumptions.
- Housing Market: The housing market has been cooling, which affects the overall pricing atmosphere in real estate; a good look for buyers who have been anxiously anticipating a “drop” or at least something in the downward direction to make the goal of homeownership more tangible.
While the Canadian economy is facing headwinds, it’s not yet clear whether it has entered a recession. Of course, hindsight is always the most reliable measure we have for being able to know what factors truly were/are hitting home, while predictions sit strongly in the camp of “everyone has an opinion and some are just slightly more informed”. The coming months will be critical in determining the country’s economic trajectory and, for many, the realistic viability of whether or not they will ever be able to afford a home in today’s real estate environment.
Note: This blog post is based on information available as of August 2024. Economic conditions can change rapidly, so it’s essential to consult recent data and expert analysis for the most up-to-date information.
