The recession will be even less deep than envisaged barely three months ago, according to the most recent quarterly study from Deloitte, which is to provide an update on the Canadian economic outlook on Tuesday.
Rather than a 1% decline in gross domestic product (GDP) this year, Deloitte experts now believe the decline will be 0.5% in 2023.
“That’s largely due to the fact that the labor market remains very robust. It added 240,000 net jobs in the country between November and February,” said Mario Iacobacci, partner, economic consulting services, at Deloitte Canada, in an interview.
“We can basically talk about a recession without job losses. That’s pretty much it for now. »
Deloitte still believes that the country has been in recession since the beginning of the year and expects a 2.4% drop in GDP for the first three months of the year and a 2.7% drop for the second quarter compared to last year. GDP will, however, register an increase of 0.2% in the third quarter and 1.7% in the last quarter of 2023, according to Deloitte.
The consulting firm also foresees the end of the slowdown in the real estate market. “The bottom will be reached during the third quarter of this year because the Bank of Canada is expected to start cutting interest rates in the fourth quarter,” said Mario Iacobacci.
Expected rate cuts beginning later this year and throughout 2024 will mark the start of the housing market recovery, according to Deloitte.
Mario Iacobacci nevertheless recognizes that the impact of successive rate increases has not yet been fully discounted due to the mortgage renewals that will have to be done over the next few years and which will see households face significant cost increases. of borrowing.
While the sector remains “extremely sensitive” to rate hikes, he notes that the outlook for the housing market remains very good in the medium term due in particular to the housing shortage in the major centers of the country.
Canadians will continue to cut spending in the short term, however, Deloitte points out. Declines in the first half of the year will be driven by lower spending on interest-rate sensitive durable goods, such as motor vehicles and motor vehicle parts, and discretionary semi-durable goods, such as clothing and shoes, it is specified.
“Despite the downturn in consumption in general, spending in the services sector is expected to continue to increase, although some segments such as accommodation, food and beverage, communications, entertainment and culture will see lower spending. short term. »
Looking ahead to next year, Deloitte believes strong population growth, reduced inflationary pressures and easing interest rates will cause consumers to untie their purses again, as real consumer spending are expected to increase by 2.6%.
Deloitte experts will obviously follow with interest the tabling of the federal budget on Tuesday in Ottawa.
“The challenge is to maintain some control over spending while addressing priorities. There is a balance to manage,” says Mario Iacobacci.
“Controlling spending is important to contain inflation. We do not want to encourage the Bank of Canada to raise interest rates even further. It is therefore very important to keep expenses under control. »
The government wants to help households facing rising borrowing costs and inflationary pressures, but its tools are limited, he says.
“We will monitor the increase in expenses, especially the increase in discretionary expenses, because the majority of expenses are not discretionary, that is to say that they come back on a recurring basis year after year. »
The government has very little influence on these expenses, underlines Mario Iacobacci. However, it is a different story for discretionary spending such as affordable housing, for example. And it is on these expenditure items that observers will keep an eye. “Will discretionary spending remain reasonable, around a 3-4% increase in current dollars (i.e. adjusting for inflation)?” »