Cdn. economy to grow in the second half of 2024: Deloitte
Deloitte said inflation is still uncomfortably high at 3.1 per cent as of November, but it's unlikely the central bank will hike rates further.
The Canadian economy will return to growth in the second half of 2024, with interest rate cuts as early as this spring, according to a new forecast by Deloitte Canada.
The firm’s economic outlook predicts stagnant growth during the first half of the year as the effects of higher interest rates continue to work their way through the system.
Deloitte Canada chief economist Dawn Desjardins said that while this could mean a technical recession — two quarters or more of negative GDP growth — it’s unlikely the Canadian economy will see the deep decline or labour market rout that typically accompany a true recession.
“We have a pretty substantive recovery in our forecast,” she said.
Momentum in the economy and the job market is poised to improve in the second half of 2024 as confidence starts to recover, Desjardins said.
The Canadian economy shrank in the third quarter of 2023, contracting 1.1 per cent on an annualized basis while growth was flat for a third straight month in October. Statistics Canada’s early estimate for November suggests an increase in real GDP for November of just 0.1 per cent.
The Bank of Canada held its key interest rate target steady at five per cent in December after a heavy-handed hiking campaign to fight inflation.
Deloitte said inflation is still uncomfortably high at 3.1 per cent as of November, but it’s unlikely the central bank will hike rates further. It predicts the central bank will begin cutting rates as soon as the path to its two per cent target is clear, something that it expects will likely be in the spring.
However, Desjardins said Canadians shouldn’t expect or even want interest rates to return to their pre-pandemic lows.
“We’ve gone through periods post-financial crisis, where we have had globally very, very low interest rates. And that sort of became the norm,” she said.
The Deloitte report predicts soft job growth in the near term but robust wage gains as workers continue to try and catch up to inflation. However, wage gains will begin to slow toward the end of 2024, while job growth will accelerate, the report said.
