Chance of a recession in Canada until a coinflip

Ottawa, Aug. 15, 2022 (GLOBE NEWSWIRE) — The most likely trajectory for the Canadian economy is slower but continued growth, according to recent analysis from the Conference Board of Canada. However, the risk of a recession in Canada and abroad is increasing.

“While we hope the pandemic waves will settle and the war in Ukraine will end, a return to normalcy could be very different from the pre-pandemic past,” said Pedro Antunes, chief economist at The Conference Board of Canada. . “Although it is difficult to assess the various risks facing Canada and the global economy, our modeling shows that the probability of Canada entering a recession in the coming year is approximately 50% .

Key factors that could prevent Canada from entering a recession include high job vacancy rates, high commodity prices and high levels of consumer savings. With record inflation limiting purchasing power in Canada, GDP is expected to grow 3.5% in 2022, but slow to 1.9% next year. As consumer spending holds up despite inflation, soaring commodity prices that fuel inflation will also serve to boost Canadian exports. High prices for oil, gasoline, wheat, canola and potash, to name a few, are boosting profits and production for Canadian exporters.

Central banks across the United States, Canada, and around the world are actively working to slow inflation without hitting the economy too hard. The challenge is all the greater since the excesses that fuel inflation are not limited to a single country. During the pandemic, many governments have opened their purse strings, borrowing heavily to support households and businesses to offset the impact of health restrictions that have crippled many segments of the economy.

Inflation is now above 7.0% in most countries and workers are demanding higher wages to compensate for this. The fear is that inflation expectations will no longer become anchored, and that businesses and households will lose confidence in the ability of central banks to bring inflation back to target rates. This reality could easily lead to central bank overvaluation, leading to a hard landing scenario that would push the economy into recession.

The reaction of stock or financial markets to these risks can be indicative of the future trajectory of the economy. Reading the tea leaves in yield curves and other indicators suggests that the risk of recession in Canada over the next 12 months is around 50%.

The full analysis is available at the link here. Media should contact [email protected] for access.

About The Conference Board of Canada:

The Conference Board of Canada is the country’s leading independent research organization. Our mission is to empower and inspire leaders to build a stronger future for all Canadians through our trusted research and unparalleled relationships. Follow The Conference Board of Canada on Twitter @ConfBoardofCda.


        

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